What is a subject-to-financing clause, and how long should it be?

Sep 22

4 min read

A subject-to-financing clause lets you cancel a signed offer, deposit intact, if your mortgage isn't approved by a set date. In Metro Vancouver, that date typically sits 5 to 10 business days after the seller accepts, with straightforward financing at the short end and self-employed or presale buyers needing the extra days.

What does a subject-to-financing clause protect you from?

Once you and the seller sign the Contract of Purchase and Sale, you're bound to buy, unless the contract lists conditions you haven't satisfied yet. A financing subject is one of those conditions. It says, in effect: this deal only becomes final once my lender confirms the mortgage.

If your lender comes back with no, or with an appraisal that comes in under the purchase price, or with terms you can't live with, the clause gives you a clean exit. You cancel in writing before the deadline.

Without it, you're on the hook to complete regardless of what your lender says. If you can't close, the seller can sue for more if their actual loss runs higher.

How long should a financing condition be in Metro Vancouver?

It depends on how complicated your financing is. Three scenarios come up most often with my buyers:

Salaried buyer, one lender, straightforward income: 5 business days is usually enough. Your lender already has your documents from pre-approval and just needs to finalize the file and order the appraisal.
Self-employed, multiple income sources, or a co-signer: 7 to 10 business days. Lenders ask for more paperwork here, and underwriting takes longer.
Presale assignment, leasehold, co-op, or a building with thin strata records: 10 to 14 business days. Some lenders won't finance certain building types at all, so your mortgage broker may need to shop the file to a second or third lender.

Ask your mortgage broker for their honest read before you write the offer. A financing clause that's too short just forces a rushed extension request in the middle of the deal.

What if your lender needs more time than the clause gives you?

You ask the seller for an extension, in writing, before the original deadline passes. Both sides sign an amendment with the new date. Nothing about a financing subject extends itself automatically.

This is the seller's chance to ask for something in return. If they're getting other showings or the market is moving, they can say no, or agree only if you increase your deposit or provide a letter from your lender confirming the file is close to approval. That's a fair trade for the seller carrying uncertainty a few more days.

The mistake I see most often: waiting until the deadline day to ask. Sellers who feel ambushed are far more likely to refuse. If your broker tells you the appraisal is delayed, tell your agent immediately so they have time to raise it with the seller before the deadline.

Should you ever waive the financing condition?

Only if you're confident you don't need it. That usually means you have a full, underwritten mortgage approval in hand, not just a pre-approval, and the appraisal risk is low because you're not stretching your offer well above recent comparable sales.

I've had buyers waive financing to compete on a specific unit. It can work. But a pre-approval is a lender's estimate based on your income and credit, not a guarantee tied to that specific property. The appraisal is the part that still can, and does, come in low sometimes. Waiving the subject means you've also waived your exit if that happens.

My read: for a first-time buyer, the financing subject is the one condition I almost never recommend giving up, even in a competitive multiple-offer situation. There are other ways to make an offer stand out. Losing your deposit isn't one of the trade-offs worth taking to win a bidding round.

Frequently asked questions

How many days is a normal subject-to-financing clause in BC?

Most Metro Vancouver offers give 5 to 10 business days. Salaried buyers with straightforward financing can often work with 5. Self-employed buyers, or anyone financing a presale assignment or non-conforming building, should ask for 7 to 14.

Can I extend my financing deadline if my lender needs more time?

Yes, but only with the seller's written agreement, signed before the original deadline. Ask your agent to raise it the moment you know there's a delay, well before the deadline.

What happens to my deposit if financing falls through before I remove subjects?

You cancel in writing before the deadline and your deposit is returned in full. This is the entire point of keeping the clause in your offer.

What happens if I waive the financing subject and then can't get approved?

You're still contractually obligated to complete. If you can't, the seller can keep your deposit as damages and may sue for any additional loss if reselling the property costs them more.

Does a financing subject cover the appraisal too, or just loan approval?

In practice, yes. Most lenders won't issue final approval until the appraisal is done, so a low appraisal that shrinks your loan amount is one of the most common reasons a financing subject doesn't get satisfied.

Barton Lui is a REALTOR® with Real Broker in Vancouver. He works mostly with first-time buyers across Metro Vancouver and speaks English, Cantonese and Mandarin.

Writing an offer soon? Book a consultation or read how long the full condo-buying process takes and what closing costs to budget for as a first-time buyer.

Reach him at 604-715-5568 or barton@bartonrealtor.com.