What Happens If Your Finance Is Declined After Signing a Contract?
Many buyers assume that if their home loan application is declined, the Contract of Sale automatically comes to an end. Unfortunately, that’s not always the case.
In Victoria, a declined finance application does not automatically terminate your Contract of Sale. To protect your deposit and avoid breaching the contract, you must follow the requirements of your finance clause and act within strict contractual deadlines.
Quick Answer
If your finance is declined, you should:
- Contact your conveyancer immediately
- Obtain a written decline letter from your lender
- Notify the vendor within the required timeframe
- Review options such as a finance extension or alternative lender
Failing to take these steps could put your deposit and property purchase at risk.
Watch Shakila Explain It
In this short video, Shakila explains what buyers should do when finance approval is declined and why acting quickly is so important.
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@allhoursconveyancing
Does a Declined Finance Approval Automatically Cancel the Contract?
Short answer: No.
Even if your lender refuses your loan application, the contract remains legally binding unless you properly exercise your rights under the finance clause.
Many buyers are surprised to learn that a finance decline alone is not enough.
- Notify the vendor within the required timeframe
- Provide written evidence that finance was declined
- Follow the termination procedure outlined in the contract
- Comply with all obligations under the finance condition
Missing these steps may result in losing your deposit or being legally required to proceed with settlement.
Finance Clauses Require Strict Compliance
According to the Legal Practitioners’ Liability Committee (LPLC), buyers relying on a subject to finance condition must comply strictly with the requirements of the contract.
What Should You Do If Your Finance Is Declined?
1. Contact Your Conveyancer Immediately
Your conveyancer will review your contract, check the finance clause and confirm important deadlines.
2. Request a Formal Decline Letter
Ask your lender for a written letter confirming finance has been declined. Verbal updates are usually insufficient.
3. Notify the Vendor Correctly
The seller is not automatically notified. Proper notice must be served within the contractual timeframe.
4. Explore Alternative Options
Depending on your circumstances, you may be able to request an extension, apply through another lender or provide additional documentation.
Can the Seller Ask for Evidence?
Yes. The vendor may request evidence showing that you genuinely attempted to obtain finance and complied with the requirements of the contract.
- Applied for finance promptly
- Requested the loan amount specified in the contract
- Provided information requested by the lender
- Took reasonable steps to obtain approval
What Happens If You Miss the Finance Deadline?
If you fail to obtain finance approval or properly terminate the contract within the required timeframe, the contract may become unconditional.
This can expose buyers to:
- Loss of deposit
- Default penalties
- Legal costs
- Claims for damages
Why Professional Conveyancing Advice Matters
At All Hours Conveyancing, we help buyers understand finance clauses, monitor critical deadlines and protect their legal and financial interests throughout the conveyancing process.
Need Advice About Your Finance Clause?
If your finance application has been delayed or declined, don’t wait until the deadline has passed.
Request a Conveyancing Quote📧 info@allhoursproperty.com.au
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