The subject to finance clause in home loan contracts, explained | Finder

Subject to finance clause

What is a subject to finance clause and how can it save you from financial ruin?

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

It’s important to pay attention to all the details of a home loan contract because they could protect you in the event something goes awry. One clause you should give particular attention to is the subject to finance clause.

A subject to finance clause gives you the option of terminating your loan contract and recovering your deposit if you can't get finance approved. In other words, the property purchase becomes conditional on you being able to get finance (a mortgage). If you are unable to get a home loan then the subject to finance clause means you can get your deposit back.

This clause also sets out the steps you need to follow to inform the property’s vendor if you’re unable to obtain finance.

Here's how it works.

Do you need a subject to finance clause?

A subject to finance clause is a fairly standard inclusion, and is also incredibly important.

It’s common practice to purchase a property before having your home loan completely sorted. In all likelihood, you would go to an auction or enter into a private treaty sale after getting pre-approval from a lender. While it’s very smart to get pre-approval, it isn’t an ironclad guarantee.

Home loan pre-approval merely means that your bank has decided it is likely to approve your loan. It isn’t legally obligated to do so, and you’re not legally obligated to accept. Any number of hurdles can come up between pre-approval and unconditional approval.

A subject to finance clause serves to protect you in the event that your lender decides not to go ahead with the home loan. It’s crucial that you make sure this clause is included in your contract, unless you’re 100% certain your home loan is in order.

Subject to finance clauses are especially important if there’s any doubt about a property’s valuation. Once you’ve signed a contract to buy a property, your lender will conduct a valuation. If this valuation comes in lower than expected, they could decide not to extend you credit for your purchase, or to offer you a lower loan amount. Without a subject to finance clause, you could be caught having to make up the shortfall.

What should you look out for?

While subject to finance clauses are important, not all are created equal. While one clause could protect you and your deposit money, another could end up being used as a weapon to pursue you for damages should your purchase not go through.

Pay attention to the following:

  • Wording. A subject to finance clause states that you as the purchaser will take all reasonable steps to acquire finance. If you don’t pay attention to the wording, those “reasonable steps” could put you in an unreasonable position.
  • Specificity. The clause shouldn’t just make a general statement about obtaining finance. It should state that the purchase is subject to obtaining finance with satisfactory terms. It could even go so far as to state that the purchase is subject to obtaining finance from a specific institution at an interest rate not higher than a specific amount. This protects you in the event your preferred lender doesn’t approve your home loan.
  • Expiry. You should also pay attention to when the clause expires. Most subject to finance clauses have a certain time and date by which finance must have been obtained. Again, if you don’t have your home loan sorted by this time and date, you will have breached the clause.

What happens if you breach the clause?

Woman signing a contractIf you breach the subject to finance clause you risk losing your deposit (if you have already paid it). And because you are legally obligated to buy the property, the vendor could force you to go ahead with the purchase. On top of this, they can also sue you for breach of contract, making you liable for damages and court costs.

This could add up to an overwhelming financial burden very quickly. For instance, if the vendor was counting on the funds from the sale to buy another property, they could pursue you for any losses resulting from their purchase falling through.

This is why it’s incredibly important to pay attention to the subject to finance clause, and to ensure it provides you adequate protection. And it also underscores the necessity of having your contract scrutinised by a conveyancer or solicitor.

How do you know you’re protected?

Ultimately, you shouldn’t rely on your own assessment of a subject to finance clause. It’s crucial to seek out legal advice when buying a property. Have a solicitor examine the contract to ensure it provides the protection you need.

The fees you pay to a good solicitor will, of course, add to the cost of purchasing your home. However, making certain you’re protected in the event something goes wrong with your finance could save you untold costs in the long-run.

Need a home loan? Start comparing

Data updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Westpac Flexi First Option Home Loan
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
$577.55
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
St.George Fixed Rate Advantage Package
1.84%
3.38%
$0
$395 p.a.
80%
$543.64
Up to $4,000 refinance cashback
Borrowers with 20% deposits or equity can get this competitive fixed rate loan. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
HSBC Fixed Rate Home Loan Package
1.88%
2.86%
$0
$390 p.a.
80%
$546.6
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.
UBank UHomeLoan Fixed
1.75%
2.22%
$0
$0 p.a.
80%
$537
This very low fixed rate is only available until 29 April 2021. Other conditions apply. A competitive fixed rate loan with no ongoing fees. Requires a 20% deposit
Westpac Fixed Option Home Loan Premier Advantage Package
1.89%
3.46%
$0
$395 p.a.
95%
$547.35
Up to $3,000 refinance cashback.
Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
St.George Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$593.01
Up to $4,000 refinance cashback
Get this low-rate variable loan with a 20% deposit and pay $0 application fee. Borrow from $150k (or $250k to be eligible for the cashback offer) (terms, conditions & exclusions apply).
Suncorp Home Package Plus Fixed
1.89%
2.85%
$0
$0 p.a.
80%
$547.35
Lock in a low fixed rate loan for two years and get the annual package fee waived in the first year. Available for borrowers with 20% deposits.
Athena Variable Home  Loan
2.19%
2.19%
$0
$0 p.a.
60%
$569.91
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
loans.com.au Smart Booster Discount Variable Home Loan
1.99%
2.47%
$0
$0 p.a.
80%
$554.81
Home buyers can get a very low discounted variable rate for the first year. This loan has a revert rate of 2.48%. Requires a 20% deposit. Add an offset account for an additional 0.10% on your interest rate.
AMP Bank Professional Package Fixed Loan
1.99%
3.1%
$0
$0 p.a.
80%
$554.81
Get a low fixed rate package with no application or settlement fee, that's available with a 20% deposit. Other fees and charges apply.
Macquarie Bank Basic Fixed Home Loan
2.09%
2.43%
$0
$0 p.a.
70%
$562.33
Get a low interest rate and a mortgage with flexible, basic features. No application or ongoing fees. Requires a 30% deposit. Refinancers can switch with a convenient digital application.
Well Home Loans Balanced Fixed Home Loan
1.89%
2.18%
$250
$0 p.a.
90%
$547.35
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.
UBank UHomeLoan Variable Rate
2.34%
2.34%
$0
$0 p.a.
80%
$581.39
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
HSBC Home Value Loan
2.44%
2.45%
$0
$0 p.a.
80%
$589.12
$3,288 refinance cashback offer
Get a low interest variable rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. If you're refinancing $250,000 or above you can get a $3,288 cashback. Terms and conditions apply.
UBank UHomeLoan Fixed
1.99%
2.33%
$0
$0 p.a.
80%
$554.81
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
86 400 Own Home Loan Fixed
2.15%
2.62%
$250
$250 p.a.
80%
$566.87
$2,000 cashback offer
A competitive fixed rate loan from an online-only smart bank. Requires a 20% deposit. Eligible new borrowers and refinancers can get a $2,000 cashback for a limited time.
Greater Bank Great Rate Fixed Home Loan
1.69%
3.49%
$0
$0 p.a.
110%
$532.6
Requires a family member to act as guarantor.
Get one of the lowest rates on the market with this fixed rate mortgage and borrow more with help from a family guarantor. NSW, QLD and ACT residents only.
Macquarie Bank Basic Home Loan
2.49%
2.49%
$0
$0 p.a.
60%
$593.01
A competitive variable rate home loan for owner-occupiers. Requires a 40% deposit. Refinancers can switch with a convenient digital application.
ME Flexible Home Loan Fixed with Members Package
1.99%
3.33%
$0
$395 p.a.
80%
$554.81
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
Suncorp Back to Basics Home Loan
2.44%
2.45%
$0
$0 p.a.
80%
$589.12
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
86 400 Neat Variable Home Loan
2.19%
2.2%
$0
$0 p.a.
60%
$569.91
Get flexibility and the option to make unlimited extra repayments with this variable rate loan.
IMB Fixed Rate Home Loan
1.97%
2.81%
$449
$6 monthly ($72 p.a.)
95%
$553.31
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 10% deposit.
Well Home Loans Balanced Variable
2.17%
2.2%
$250
$0 p.a.
80%
$568.39
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee.
homeloans.com.au Low Rate Home Loan with Offset
2.14%
2.16%
$0
$0 p.a.
60%
$566.11
A competitive rate with no application or ongoing fees. This loan is not available for construction.
Virgin Money Reward Me Fixed Rate Home Loan
2.04%
2.79%
$300
$10 monthly ($120 p.a.)
80%
$558.56
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 27 February 2021 and settle by 27 August 2021.
Bank of Melbourne Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$593.01
Up to $4,000 refinance cashback
A competitive variable rate loan. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Well Home Loans Balanced Fixed Home Loan
1.95%
2.17%
$250
$0 p.a.
90%
$551.82
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
homeloans.com.au Low Rate Home Loan with Offset
2.24%
2.26%
$0
$0 p.a.
90%
$573.72
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.
BankSA Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$593.01
Up to $4,000 refinance cashback
A competitive variable rate loan from BankSA. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Bank of Melbourne Advantage Package Fixed Home Loan
1.94%
3.21%
$0
$395 p.a.
80%
$551.07
Up to $4,000 refinance cashback
Lock in a low fixed rate loan for four years. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
CUA Achieve Variable Home Loan
2.35%
2.4%
$600
$0 p.a.
95%
$582.16
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
Westpac Fixed Option Home Loan Premier Advantage Package
1.99%
3.29%
$0
$395 p.a.
95%
$554.81
Up to $3,000 refinance cashback. Lock in a very low rate for four years with this owner occupier loan. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
BankSA Advantage Package Fixed Home Loan
1.89%
3.43%
$0
$395 p.a.
80%
$547.35
Up to $4,000 refinance cashback.
Fix to a low rate for two years and forget about rate rises. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Bank of Melbourne Advantage Package Fixed Home Loan
1.84%
3.38%
$0
$395 p.a.
80%
$543.64
Up to $4,000 refinance cashback
Get a competitive home loan rate for two years. Requires at least a 20% deposit. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
loans.com.au Fixed
1.99%
2.7%
$0
$0 p.a.
80%
$554.81
Home buyers can lock in this low fixed rate for two years. This loan also allows extra repayments. Requires a 20% deposit.
BankSA Advantage Package Fixed Home Loan
1.99%
3.26%
$0
$395 p.a.
$554.81
Up to $4,000 refinance cashback
A competitive fixed rate loan. Refinancers borrowing $200,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Heritage Bank Fixed Rate Home Loan
2.19%
4.23%
$600
$8 monthly ($96 p.a.)
95%
$569.91
Get a partial offset account and the option to make interest-only repayments.
St.George Fixed Rate Advantage Package
1.94%
3.21%
$0
$395 p.a.
80%
$551.07
Up to $4,000 refinance cashback
Lock in a very low rate for four years. Requires a 20% deposit. Refinancers borrowing $250,000 or more can get up to $4,000 cashback (Other terms, conditions and exclusions apply).
Athena Variable Home  Loan
2.24%
2.21%
$0
$0 p.a.
70%
$573.72
A low variable rate for owner occupiers with 30% deposits. No upfront or ongoing fees.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.28%
3.84%
$0
$395 p.a.
95%
$576.78
$2,000 refinance cashback
Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
ME Flexible Home Loan Fixed with Members Package
2.09%
3.27%
$0
$395 p.a.
80%
$562.33
Get a low 3 year fixed rate with a 100% offset account and package discounts.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan
2.59%
2.6%
$0
$0 p.a.
110%
$600.83
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, QLD and ACT only.
IMB Budget Home Loan
2.58%
2.64%
$449
$0 p.a.
80%
$600.05
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
Well Home Loans Balanced Fixed Home Loan
2.29%
2.29%
$250
$0 p.a.
90%
$577.55
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
homeloans.com.au Low Rate Home Loan with Offset
2.69%
2.52%
$0
$0 p.a.
80%
$608.71
A competitive rate with no application or ongoing fee. This loan is not available for construction.
ME Basic Home Loan
2.58%
2.6%
$0
$0 p.a.
80%
$600.05
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
UBank UHomeLoan Fixed
2.14%
2.35%
$0
$0 p.a.
80%
$566.11
A one year fixed rate offer with no ongoing bank fees.
Heritage Bank Discount Variable Home Loan
2.59%
2.64%
$600
$0 p.a.
80%
$600.83
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
UBank UHomeLoan Fixed
2.14%
2.71%
$0
$0 p.a.
80%
$566.11
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
ME Flexible Home Loan Fixed
2.64%
4.65%
$0
$0 p.a.
80%
$604.76
Lock in a competitive rate for 2 years, unlock package discounts and use a 100% offset account to minimise interest payments.
Heritage Bank Advantage Package Fixed
2.39%
3.15%
$0
$350 p.a.
95%
$585.25
Get a partial offset account and flexible repayments with this package loan.
homeloans.com.au Low Rate Home Loan with Offset
2.59%
2.42%
$0
$0 p.a.
60%
$600.83
Macquarie Bank Offset Home Loan Package
2.49%
2.76%
$0
$0 p.a.
60%
$593.01
A sharp variable rate with low fees for borrowers with 40% deposits or refinancers with equity in their properties. Refinancers can switch with a convenient digital application.
loans.com.au Smart Booster Discount Variable Home Loan
1.99%
2.71%
$0
$0 p.a.
80%
$554.81
If you have an owner occupier loan with loans.com.au you can also get this very low rate variable mortgage for your investment property. Principal and interest repayments. Add an offset account for an additional 0.10% on your interest rate.
homeloans.com.au Low Rate Home Loan with Offset
2.74%
2.76%
$0
$0 p.a.
90%
$612.67
Access a fee-free offset account and a special interest rate for investors. This loan is not available for construction.
St.George Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
90%
$596.91
$2,000 cashback.
With this competitive variable rate loan from St.George, refinancers borrowing $250,000+ can get a $2,000 cashback (terms, conditions & exclusions apply)
Macquarie Bank Basic Fixed Home Loan
2.19%
2.53%
$0
$0 p.a.
80%
$569.91
Borrow up to $750,000 with this basic 3 years fixed rate home loan. Refinancers can switch with a convenient digital application.
Bank of Melbourne Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
90%
$596.91
$2,000 cashback
A competitive variable rate loan. Refinancers borrowing $250,000 or more can get a $2,000 cashback (Other terms, conditions and exclusions apply).
homeloans.com.au Low Rate Home Loan with Offset
2.39%
2.41%
$0
$0 p.a.
80%
$585.25
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account. This loan is not available for construction.
IMB Budget Home Loan
2.68%
2.74%
$449
$0 p.a.
95%
$607.92
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
Newcastle Permanent Building Society Real Deal Home Loan
2.59%
2.63%
$595
$0 p.a.
80%
$600.83
$2,000 refinance cashback
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan Variable Rate
2.74%
2.74%
$0
$0 p.a.
80%
$612.67
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
Virgin Money Reward Me Variable Home Loan
2.59%
2.76%
$300
$10 monthly ($120 p.a.)
60%
$600.83
$3,000 refinance cashback.
A variable rate loan for owner occupiers with a 40% deposit (or equity) borrowing under $500,000. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 27 February 2021 and settle by 27 August 2021.
homeloans.com.au Low Rate Home Loan with Offset
2.29%
2.31%
$0
$0 p.a.
60%
$577.55
A competitive rate with no application or ongoing fee. This loan is not available for construction.
ME Flexible Home Loan Fixed
2.14%
3.95%
$0
$0 p.a.
80%
$566.11
Get a low fixed rate and pay no application or ongoing fees.
IMB Fixed Rate Home Loan
2.09%
2.9%
$449
$6 monthly ($72 p.a.)
95%
$562.33
NSW and ACT customers only. Lock in a low fixed rate for two years. Available with a 5% deposit.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.48%
3.77%
$0
$395 p.a.
95%
$592.23
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
homeloans.com.au Low Rate Home Loan with Offset
2.59%
2.61%
$0
$0 p.a.
90%
$600.83
Save on interest with a free 100% offset account and buy your property with just a 10% deposit. This loan is not available for construction.
IMB Fixed Rate Home Loan
2.49%
3.36%
$449
$6 monthly ($72 p.a.)
90%
$593.01
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
ME Flexible Home Loan With Member Package
2.59%
3.05%
$0
$395 p.a.
80%
$600.83
$2,000 cashback offer
A competitive variable rate package home loan with a 100% offset account. Eligible refinancers can get a $2,000 cashback.
UBank UHomeLoan Fixed
2.29%
2.72%
$0
$0 p.a.
80%
$577.55
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
HSBC Home Value Loan
2.54%
2.55%
$0
$0 p.a.
90%
$596.91
A competitive value home loan with no ongoing fee.
Well Home Loans Balanced Fixed Home Loan
2.04%
2.17%
$250
$0 p.a.
90%
$558.56
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.58%
3.99%
$595
$0 p.a.
95%
$600.05
$2,000 refinance cashback
Borrow up to 95% LVR of the value of the property you're buying and pay no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Macquarie Bank Basic Home Loan
2.64%
2.64%
$0
$0 p.a.
80%
$604.76
Pay no application and ongoing fees and take advantage of split and redraw options. Refinancers can switch with a convenient digital application.
Well Home Loans Balanced Variable
2.52%
2.55%
$250
$0 p.a.
90%
$595.35
A very low variable interest rate for borrowers with a 10% deposit. Add a 100% offset account for $10 a month. Not available for construction purposes.
Newcastle Permanent Building Society Premium Plus Package Home Loan
2.94%
3.34%
$0
$395 p.a.
95%
$628.65
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
loading

Compare up to 4 providers

Image: Shutterstock

More guides on Finder

Home Loan Offers

Important Information*

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.