When you`re in the market for a new home, there`s a high probability that you`ll encounter the term „subject to mortgage agreement.“ While it may seem like a simple phrase, it has significant implications for both homebuyers and sellers. In this article, we`ll dive deeper into what „subject to mortgage agreement“ means and what to keep in mind when buying or selling a home.

What does „subject to mortgage agreement“ mean?

„Subject to mortgage agreement“ is a clause in a real estate contract that states the sale of the property is contingent upon the buyer securing a mortgage loan. In simpler terms, it means that the sale is dependent on the buyer getting mortgage approval. If the buyer is unable to secure a mortgage, the sale cannot proceed.

This clause provides protection for both parties involved in the transaction. For sellers, it ensures that the buyer has the means to pay for the property. For buyers, it provides a safeguard to opt-out of the purchase in case they are unable to obtain financing.

What are the risks for buyers and sellers?

For buyers, the primary risk is failing to obtain mortgage approval. In this scenario, the buyer loses their deposit and any expenses they may have incurred during the home buying process. It`s crucial to work with a reputable lender and obtain a pre-approval before signing any contracts to reduce the risk of mortgage rejection.

For sellers, the primary risk is time. If the buyer is unable to secure a mortgage, the seller may need to relist the property and start the process all over again. This could lead to lost time, missed opportunities, and additional expenses.

How can buyers and sellers handle the risks?

Buyers can take steps to minimize the risks associated with „subject to mortgage agreement“ clauses. This includes obtaining a pre-approval from a reputable lender, having a backup plan in case mortgage approval falls through, and carefully reviewing the terms of the contract before signing.

Sellers, on the other hand, can reduce the risk of lost time and expenses by carefully vetting potential buyers. This includes reviewing their creditworthiness, financial history, and employment status. They can also work with their real estate agent to negotiate favorable terms and conditions that protect their interests.


„Subject to mortgage agreement“ is a crucial clause in any real estate contract. It provides protection for both buyers and sellers while allowing for a smoother transaction process. Buyers and sellers must understand the risks involved in this clause and take appropriate steps to minimize them. By doing so, they can ensure a successful home purchase or sale.