Buying a Canterbury Property With a Finance Condition

The finance condition is the most common condition included in Canterbury property offers. It protects you from being legally bound to purchase a property if your bank declines to advance the funds needed to complete the purchase.

What a Finance Condition Covers

A standard finance condition makes your offer conditional on you obtaining finance satisfactory to you by a specified date. Satisfactory finance typically means formal bank approval (not just pre-approval) for sufficient funds to complete the purchase, at interest rates and on terms acceptable to you. The condition also covers the bank's approval of the property as satisfactory security - a bank can decline to lend on a specific property even if they have pre-approved your borrowing capacity, if the property has issues they consider unacceptable (complex earthquake repairs, TC3 land without adequate engineering assessment, or other title or structural concerns).

How Long Should the Finance Condition Run

A standard Canterbury finance condition runs five to fifteen working days from the date the agreement is signed. Shorter timeframes (five to seven working days) give the vendor more certainty sooner and can make your offer more attractive in a competitive situation. Longer timeframes (ten to fifteen working days) give you more time to work through any complications. Discuss with your mortgage broker how quickly your bank can provide formal approval before agreeing to a specific finance condition deadline - underestimating the time needed and having to request an extension can cause stress and occasionally results in the vendor declining the extension request.

What Satisfying the Finance Condition Requires

To satisfy your finance condition, your bank must provide formal (not pre-approval) written approval for the specific loan amount on the specific property. You then instruct your solicitor to declare the condition satisfied by the deadline date. Once you declare the condition satisfied, you cannot reactivate it if the bank subsequently declines - so only declare the finance condition satisfied when you have genuine formal bank approval in writing.

If Finance Is Declined

If your bank declines to provide finance on the specific property within the condition timeframe, you can cancel the agreement under the finance condition and your deposit should be returned. Under updated sale and purchase agreement terms, buyers must demonstrate a genuine attempt to obtain finance before cancelling - you cannot use a finance condition as a pretext for buyer's remorse. Always maintain contemporaneous records of your finance application attempts.

Information from Settled.govt.nz, the Real Estate Authority, and Price My Property NZ. For general information only - always obtain independent legal and mortgage advice before signing a conditional agreement.