Subject To Financing
Buying a home is exciting and while today’s market is a buyers market it is still important to understand the importance of having a Subject to Financing clause in your purchase offer. Multiple offers, tight timelines, and seller expectations often push buyers to make bold moves, including waiving their financing condition. While this can give you an edge, it also comes with serious risks. Before you take that leap, here’s what you need to know to protect yourself and your investment.
Understanding What You’re Releasing
A financing condition in your purchase agreement is your safety net. It means your offer is conditional on your lender giving you final mortgage approval. If that approval doesn’t come through, you can walk away without losing your deposit.
Waiving this condition? You’re stepping off that net. Without lender commitment, you’re legally on the hook to complete the purchase even if your financing falls apart.
Why Buyers Still Take the Leap in BC
In many parts of BC, especially Greater Vancouver, the Fraser Valley, and Victoria multiple offers are common. Sellers love clean, unconditional offers because they close faster and carry less uncertainty.
Some buyers drop the financing condition to stand out in a bidding war. In a hot market, that can be the deciding factor in winning a home.
The Added BC Twist
BC’s rules add extra layers of complexity. For example:
- High purchase prices: Any property over $1.5 million is uninsurable under CMHC rules, which means you need at least a 20% down payment and your lender is taking on more risk.
- Appraisal requirements: BC lenders often require appraisals, and in a rising market, appraisal values can come in lower than the offer price. Without the financing condition, you could be on the hook for the difference in cash.
- Unique property types: Many homes like float homes, leasehold properties, or certain strata buildings can face lender restrictions that aren’t obvious until underwriting begins.
Mitigating the Risk: Play It Smart
If you’re thinking about waiving your financing condition, take these steps first:
- Get fully pre-approved, not just pre-qualified. Your broker should have all income documents, down payment proof, and credit checks done in advance.
- Know your lender’s property guidelines. Some lenders won’t finance certain property types or rural locations.
- Stress-test your budget. If the appraisal comes in short or rates move up before closing, can you cover the gap?
- Factor in closing costs. In BC, that means Property Transfer Tax (PTT), potential GST on new builds, and legal fees.
Real BC Example: The Appraisal Gap Shock
A couple in Langley found their dream home listed at $1.15M. They were in a bidding war and decided to waive their financing condition after being told they were “pre-approved.” They won the offer but when the lender’s appraisal came back at $1.08M, the bank would only lend based on the appraised value.
This meant the buyers had to come up with an extra $70,000 in cash, on top of their original down payment, just to close. Without that money, they risked losing both the home and their $30,000 deposit. Fortunately, family stepped in to help, but it was a stressful and costly lesson about waiving conditions too soon.
| Balance Sheet | |
| Benefit of Waiving | Potential Risks |
| More attractive offer in hot markets | No exit option if mortgage falls through; deposit may be forfeited |
| Faster, cleaner process for sellers | Legal obligation to close even without financing due to risk of appraisal shortfall |
| Could edge out competition | Could lead to overpaying; high cash risk if lender denies final approval |
Checklist Before Waiving Your Financing Condition
Use this quick self-check to reduce your risk before making the leap:
- Full pre-approval in place (all documents reviewed, credit checked, and income verified).
- Down payment verified with your lender (including source of funds).
- Appraisal risk discussed…know the market value and how much of a gap you could cover if needed.
- Property type reviewed for lender compatibility (strata, leasehold, rural, unique homes).
- Closing costs calculated (PTT, GST if applicable, legal fees, adjustments).
- Rate hold secured so you’re protected if rates rise before closing.
- Emergency funds or backup plan in case of shortfall.
- Broker has reviewed the offer price relative to recent sales in the area.
- You’re comfortable with the risk even in a worst-case scenario.
Final Takeaway
Waiving your financing condition can win you the deal in competitive markets but it’s not for everyone.
If your financial documents are rock solid, your pre-approval is thorough, and your broker has reviewed the property type in advance, you can reduce the risk. But remember, without that financing condition, you’re betting on everything going exactly right.
If you’re thinking about this strategy, let’s talk through your situation before you make the call. The right preparation can mean the difference between a dream home and a costly mistake.