Financing condition:how it works in a Canadian home sale, and what happens once it's waived
A few business days to confirm a mortgage. Once the buyer waives, the deal is firm whether the lender comes through or not, and the risk moves to the seller.
Short answer: A financing condition lets a buyer cancel the deal if they can't get a mortgage by a set date. Once the buyer waives it, the sale is firm, and the buyer has to close whether or not the lender comes through. That's the moment the risk moves to the seller.
Most guides explain the financing condition to buyers and stop there. We'll cover both sides: what the clause does, how long it usually runs, why a pre-approval isn't a mortgage, how BC handles the same thing under the name "subject removal," and what protects a seller once the condition is gone.
What is a financing condition in a Canadian offer?
A financing condition is a clause in the offer that makes the sale conditional on the buyer arranging satisfactory mortgage financing by a deadline. In Ontario, the standard wording says the offer is conditional upon the buyer arranging satisfactory financing. You'll also hear it called a mortgage condition, a financing clause, or "subject to financing."
While the condition is in place, the deal is conditional. If the buyer can't get approved before the deadline, they can let the condition fail or give notice, and the agreement ends. The deposit normally goes back to the buyer through a mutual release.
The condition is for the buyer's benefit, and only the buyer can waive it. When they do, in writing, the financing condition is gone for good.
How long does a financing condition usually last?
There's no legislated length. It's whatever the buyer and seller agree to in the offer. In practice, a financing condition commonly runs about five business days in Ontario and somewhat longer in many other provinces. In BC, a typical subject period is five to ten business days.
Shorter periods make an offer more attractive to a seller. They also give the buyer's lender less time to finish its work, which is where most of the trouble starts.
What's the difference between pre-approval and a mortgage commitment letter?
A pre-approval is an estimate. A mortgage commitment letter is a lender's written approval for a specific property. They are not the same thing, and treating them as the same is one of the most expensive mistakes a buyer can make.
The Financial Consumer Agency of Canada is clear on this. Pre-approval tells you the most a lender may lend you and can hold a rate for a set period, but it isn't final approval. A lender can still refuse after pre-approving you, and it will check that the property itself meets its standards first.
Here's the part most articles skip. Even a commitment letter usually comes with conditions attached, most often confirming income and appraising the property. A full appraisal can take time to book and report, so the appraisal is often still open when buyers waive financing. A commitment letter with open conditions is closer to the finish line, but it isn't over it.
What does "subject removal" mean in BC?
In British Columbia, conditions are called "subjects," and the financing condition is usually written as "subject to financing." Subject removal is the buyer's written notice that the subjects are satisfied or waived. Once the subjects are removed, the deal is firm, the same as waiving a financing condition in Ontario.
| Ontario and most provinces | British Columbia | |
|---|---|---|
| What it's called | Financing condition | Subject to financing |
| How it ends | Buyer waives or fulfils it in writing | Buyer removes subjects in writing |
| Typical length | About 5 business days (Ontario) | 5 to 10 business days |
| After it's gone | Firm deal | Firm deal |
BC has one extra layer. Since January 3, 2023, the Home Buyer Rescission Period gives BC buyers three business days after acceptance to back out for a fee of 0.25% of the price. It runs at the same time as the subject period, not after it. Once those three days pass and subjects are removed, a BC buyer is as committed as any firm buyer in Canada.
What happens if a buyer waives financing and then can't get the mortgage?
Once the financing condition is waived, the buyer is bound to close, mortgage or no mortgage. If the lender doesn't fund and the buyer can't find the money elsewhere, the buyer is in breach. The seller can keep the deposit and sue for losses beyond it. You can read more about what waiving conditions does across the whole offer.
It often doesn't start with a buyer walking away. It starts with a delay. The lender asks for one more document, or the appraisal comes back late or low, and the buyer asks to push the closing date.
That's what happened in Philp v. Osungade, 2024 ONSC 3064, an Ontario Superior Court decision. A Clarington home listed at $799,900. The buyers removed their financing condition to win it and raised their offer to $1,035,000. On the closing date, they asked for a one-week extension because their lender needed an appraisal. They didn't accept the seller's terms for the extension, and the deal didn't close.
The sellers re-listed at the original price and sold for $850,000, $185,000 below the first deal, while carrying bridge financing on their next home. The court awarded them $159,915.26 in damages, after the buyers' $25,000 deposit was forfeited. The sellers won in court, but the deposit covered a fraction of the loss, and the rest depended on a lawsuit.
A waived financing condition doesn't remove the financing risk from the deal. It moves it from the buyer's side of the contract to the seller's.
Want to see what a failed closing costs from the seller's side? Read a real buyer default case taken from Canadian court records, line by line.
How can a seller protect the sale once the deal is firm?
Before the deal goes firm, a seller's protection is in the offer itself. Some sellers prefer a shorter financing condition, a larger deposit, or a buyer whose lender has already reviewed the file. Those choices make a buyer more likely to close. None of them help after the buyer fails to.
After the deal is firm, the seller has the deposit and the courts. The deposit usually sits in trust until both sides agree to release it or a court orders it, and a lawsuit takes time and money while the seller keeps paying for a house they thought was sold.
That's the gap Home Closing Insurance is built for. It protects the seller, who is the insured party, if the buyer delays or fails to close on a firm sale. If the claim is covered, it pays the legal costs of pursuing the buyer and advances the buyer's deposit. Depending on the plan, it can also cover carrying and relisting costs (Essentials Plus and Comprehensive) and a lower resale price (Comprehensive), up to a maximum of $250,000 per policy.
The timing fits the financing condition exactly. A seller can get pre-approved while the deal is still conditional, and the rate holds for 90 days. Policies start at $349 and depend on the plan and coverage selected, and you pay once, after the sale is firm. If the buyer waives financing and the sale goes firm, the seller can still apply as long as closing is more than 15 days away. Coverage is subject to the policy's terms, limits and exclusions.
For buyers, there's a practical upside too. An offer that comes with the seller's closing risk addressed can be a stronger offer, especially when the buyer can't remove every condition early.
Questions people ask
Can a seller refuse an offer with a financing condition?
Yes. A seller can refuse, counter with a shorter condition period, or accept a different offer. Whether to accept one is a judgment call about the buyer's financing, the deposit and the market, and many sellers accept financing conditions every day.
Does the buyer get the deposit back if financing falls through before waiving?
Usually, yes. If the financing condition isn't satisfied or waived by the deadline, the agreement ends and the deposit is normally returned, typically through a mutual release signed by both sides. Check the exact wording in your agreement with your real estate lawyer.
Is it risky to buy without a financing condition?
Yes, especially without a mortgage commitment in hand. A buyer who waives financing, or never includes it, must close even if the lender declines or the appraisal comes in low. They can lose the deposit and be sued for the seller's losses beyond it.
How long is a financing condition?
Commonly about five business days in Ontario, and five to ten business days for a typical BC subject period. The length is negotiated in the offer, not set by law.
Is a mortgage pre-approval enough to waive financing?
No. A pre-approval isn't final approval, and a lender can still refuse after it, according to the Financial Consumer Agency of Canada. Most buyers are better placed to waive once the lender has issued a commitment and its conditions, including the appraisal, are satisfied.
The bottom line on the financing condition
The financing condition protects the buyer right up until they waive it. After that, the deal is firm, the lender's decision still matters, and the seller is the one exposed if the money doesn't arrive on closing day. Buyers should waive only when the lender's file is truly done. Sellers should know what protects them once it is.
If you've accepted an offer with a financing condition, or the buyer has just waived it, see how Home Closing Insurance protects the seller between firm and closing day.
A firm deal ends the buyer's right to walk away. It doesn't end the seller's risk.
This article is general information, not legal, financial or insurance advice. Coverage depends on the terms, limits, exclusions and conditions of the policy or surety issued.
