Financing Condition Ontario Wording, Deadlines, Cases

Published 11 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty

Last updated 11 September 2026. Written by Jatin Dua, Broker of Record at RE/MAX Quantum Realty, 799 The Queensway, Etobicoke · For Ontario registrants · 10 min read

The short answer

There is no single financing condition in Ontario. The clause library splits the job across several, and choosing between them is the work. MORT-2 (Condition – Arranging a New Mortgage) states the loan in dollars. MORT-3 frames it as a percentage of the purchase price. MORT-4 makes the financing a matter of the buyer’s satisfaction. MORT-1 (Condition – Approval to Assume Existing Mortgage) covers a buyer stepping into the seller’s existing loan, which behaves differently again. The thing most agents get wrong is the waiver: in 1854329 Ontario Inc. v. Cairo, 2022 ONCA 744, a buyer waived financing on a non-binding term sheet, the funding never came, and the deposit was forfeited with relief refused.

A term sheet is not a commitment letter

Start with the file that goes wrong, because it is always the same file. The buyer has something from a lender on letterhead – an amount, a rate, a name at the top. The agent reads it as financing, the waiver goes out before five, and the deal is firm. Then the money does not appear and the deposit is gone.

That is, as reported, what happened in 1854329 Ontario Inc. v. Cairo, 2022 ONCA 744. The buyer waived on a non-binding term sheet, the funding fell through, the deposit was forfeited and relief from forfeiture was refused. The mistake is not exotic. It is the most ordinary one in Ontario residential practice.

A term sheet is a lender describing what it might do. A commitment letter is a lender saying what it will do, subject to conditions the lender lists – and those are their own problem, because a commitment subject to a satisfactory appraisal is not unconditional money. So the question on a waiver is never whether the buyer got approved. It is: what document is this, and what is it subject to.

And do not treat relief from forfeiture as a backstop. Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, as reported, sets a demanding test: the sum forfeited must be out of all proportion to the damages and the forfeiture unconscionable. Both. Which also means there is no safe deposit percentage – the test is comparative.

The short version

A waiver is a legal act, not a status update. Read the lender document before it leaves your hand and find out what it is still subject to. A term sheet is not a commitment letter.

Arranging new money and stepping into existing money are different problems

The Mortgages category runs to thirty clauses and agents treat it as one drawer. The first fork is whether the buyer is borrowing fresh money or taking over what is already registered. MORT-2, MORT-3 and MORT-4 arrange new financing. MORT-1 is the other branch: the buyer assumes the seller’s charge and needs that lender’s approval.

The difference is who controls the outcome. A condition whose fulfilment depends entirely on a third party who is not a party to the agreement behaves as a true condition precedent in the sense described in Turney v. Zhilka (Supreme Court of Canada, 1959). Neither side waives it unilaterally.

New financing. The buyer controls the application and the lender. The condition is for the buyer’s benefit and carries a waiver right.
Assumption with approval. An outside lender decides. Treat it as unwaivable and build the timeline around that lender’s queue.
Assumption without approval. MORT-13 (Existing Mortgage – Buyer to Assume (No Approval)) records an assumption where none is sought.

Raise this with a seller before they agree to an assumption: the original borrower’s covenant does not evaporate because a buyer assumes the loan. Unless the lender releases the seller in writing, the seller stays on the hook for a mortgage on a house they no longer own. Flag it and send them to their lawyer.

Dollar amount, percentage of purchase price, or plain satisfaction

On the new-financing branch you choose how tightly to specify the loan, which decides how easily the condition can fail. MORT-2 fixes a principal figure, a rate ceiling, a payment and a term. MORT-3 (Arranging a New Mortgage as Percentage of Purchase Price) expresses the principal as a share of price and brings amortization in. MORT-4 (Arranging New Mortgage Satisfactory to Buyer) drops the particulars and turns on the buyer’s satisfaction.

Percentage framing has an advantage almost nobody articulates. Prices move – on an inspection renegotiation, a sign-back, a low appraisal the parties split – and a fixed dollar figure stops matching the deal. A percentage travels with the price. Fixed dollars do the reverse: a seller knows what has to fail before the buyer has a route out.

MORT-4 is the one a listing agent should look at hardest, because stripping out the particulars leaves little to test objectively. Marshall v. Bernard Place Corp. (Ontario Court of Appeal, 2002) is an inspection case, but as reported it treats a discretionary condition as having both an objective and a subjective element, so sole discretion is not a free option to walk. Whether that reaches a financing condition framed on satisfaction is not ground I would plan around.

SATISFACTION IS NOT A FREE OPTIONA buyer who never applies, or applies in bad faith to manufacture an exit from a deal they regret, is exposed. So is the agent who suggested it. Second thoughts are a conversation about the deposit and their lawyer.

The condition subsequent runs backwards, and almost nobody notices

MORT-5 (Condition – Arranging New Mortgage (Condition Subsequent)) inverts it. Silence leaves the agreement alive and binding, whether or not the buyer arranged the mortgage. To get out, the buyer must deliver a notice terminating. Same book, same subject, opposite direction.

I have watched an agent paste that variant in because it sat in the mortgage section and looked like a financing condition. It is also the version that removes a buyer’s silent exit. If the buyer is away and nobody covers the file, a condition precedent fails harmlessly while a condition subsequent hardens into a firm deal on a mortgage that does not exist.

Ask one question of every condition you write

If everyone goes quiet and nobody sends anything, what happens at 11:59 on the deadline? If the deal dies, it is a condition precedent. If the deal becomes firm, it is a condition subsequent and your diary entry has to be a hard one.

Notice mechanics: waiver and fulfilment are different instruments

In High Tower Homes Corp. v. Stevens, 2014 ONCA 911, as reported, a waiver delivered by fax where the agreement required personal delivery was ineffective. Not late – delivered by the wrong method, and therefore not delivered. The notice clause governs.

So before the condition period opens, read the notice provisions in the agreement you actually signed, including anything a schedule did to them. Which channels are permitted, which addresses are recorded, and is a brokerage authorised to receive notice at all – a question that matters most in multiple representation.

A waiver and a notice of fulfilment are also not interchangeable. Fulfilment says the financing described was arranged. A waiver says it was not, and the buyer is giving up the protection anyway. Sending a fulfilment when what occurred was a waiver puts a misstatement in writing over your client’s signature.

Illustrative only, and my own wording rather than OREA’s: a schedule can provide that notices under a condition may be given by email to the addresses recorded in the confirmation of acceptance, and are effective when sent. That fragment shows the idea; it is not for copying into your file.

One counterweight. In VanderMolen Homes Inc. v. Mani, 2025 ONCA 45, as reported, buyers who had waived conditions and paid the deposit were held bound even though the seller’s acceptance of an extension arrived a day late; subsequent conduct kept the agreement alive. A missed deadline does not automatically end a deal, in either direction.

DELIVER EARLY, AND BY THE RIGHT ROADWaivers that go out at 4:55 leave no room to fix a bounced address or a prohibited channel. I want condition documents out in the morning, acknowledged in writing, and the transmission record saved the same day. High Tower is a case about method, and method is within your control.

Where appraisal risk actually sits

Lenders generally advance against the lesser of the purchase price and their own appraised value. In a competitive market a buyer can win at a number an appraiser will not support, and the shortfall lands on the down payment, in cash, with about ten days’ notice.

A financing condition can catch that, but only while it is alive. A fixed-dollar MORT-2 fails if the lender will not advance the stated principal; a percentage MORT-3 fails if it will not advance the stated share. Neither helps once the condition is waived, and appraisals often land at the very end of a short period.

So build the timeline backwards from the appraisal, not forwards from acceptance. And if the buyer intends to waive with an appraisal outstanding, the question is not rate: if the value comes in short, where does the extra cash come from, and is it liquid. Get that in an email first.

The seller-side clauses agents forget exist

Clause	The decision it reflects	Built for
MORT-1 (Approval to Assume Existing Mortgage)	Buyer takes over the charge, subject to lender approval	Buyer, but nobody waives it
MORT-2 (Arranging a New Mortgage)	New financing in dollars, rate, payment, term	Buyer, waivable
MORT-3 (Percentage of Purchase Price)	Principal as a share of price	Buyer; survives a price change
MORT-4 (Satisfactory to Buyer)	No particulars; the buyer’s satisfaction	Buyer; the widest exit
MORT-5 (Condition Subsequent)	Firm unless the buyer notices to terminate	Seller; silence favours the deal
MORT-14 with MORT-15 (Seller Take Back)	Seller financing, security protected	Seller
MORT-11 and MORT-12 (prepayment)	Who absorbs the discharge penalty	The party named

Two of those deserve a sentence. Pairing MORT-14 with MORT-15 exists to stop a property being financed past the point where the seller’s second position is worth anything. And here is a trap in plain sight: where the buyer’s new financing is meant to be arranged through the seller’s existing lender, usually so the seller avoids a discharge penalty, a free waiver right defeats the arrangement. The buyer waives, borrows cheaper elsewhere, and the seller absorbs the penalty. Either name the lender and withhold the waiver right, or shift the penalty with MORT-11. Pull the current wording from your own OREA member copy.

Your exposure as the registrant who drafted it

If the other side is self-represented, you cannot advise them on price, terms or clauses – including explaining what a financing condition would do for them or how many days to ask for. Under TRESA and RECO Bulletin 2.4, confirm they intend to proceed unrepresented, deliver and explain the RECO Information Guide and the Information and Disclosure to Self-Represented Party form, say plainly that you represent your client and not them, and make reasonable efforts to obtain written acknowledgement. No acknowledgement is required for the Guide itself.

In multiple representation under Bulletin 3.2 you become a facilitator – no advice to either side on offer price or negotiating strategy. A buyer asking whether to waive financing wants exactly what you cannot give.

Then the deposit. The condition contemplates the money coming back in full, but that is a statement between buyer and seller about entitlement, not an instruction the deposit holder can act on. A brokerage may release deposit money on a written direction signed by all parties, or on a court order. A formal mutual release is not strictly required – the written direction is. More in the deposit clauses post.

How I want a financing condition handled

Ask the buyer’s broker whether an appraisal is required and how long that lender is taking, before the offer goes in.
Choose consciously between a dollar amount, a percentage of price, and a satisfaction clause.
Confirm the condition is precedent, not subsequent, unless you meant otherwise.
Read the notice provisions on acceptance, and record the permitted channels and addresses on the file.
Diarise the deadline and a check-in seventy-two hours before it.
Before any waiver, read the lender document. If anything material is outstanding, the answer is an extension.
Send the correct instrument early in the day by a permitted channel, and get the acknowledgement in writing.

Deposits are rarely lost because an agent did not know the law. They are lost because nobody built a timeline. The rest of this series is indexed at all articles.

Questions agents actually ask

How many days should a financing condition run in Ontario?

Long enough for the lender, not long enough to bother the seller. Ask the buyer’s broker whether an appraisal is required and what that lender’s current turnaround is, then work backwards from the appraisal. Five business days is common in competitive markets and is frequently too short for an appraised file. If you need an extension, ask early rather than on the deadline.

Can a buyer waive a financing condition?

It depends which clause you used. The new-financing conditions, MORT-2, MORT-3 and MORT-4, are drafted for the buyer’s benefit and carry a waiver right. MORT-1, approval to assume an existing mortgage, turns on a decision by a lender who is not a party to the agreement, and a condition of that character is not something either side waives unilaterally. Read the clause first.

Is a mortgage pre-approval enough to waive financing on?

No, and this is where deposits are lost. A pre-approval and a term sheet describe what a lender might do. A commitment letter says what it will do, subject to conditions the lender lists. In 1854329 Ontario Inc. v. Cairo, 2022 ONCA 744, as reported, a buyer waived on a non-binding term sheet, the funding failed, and the deposit was forfeited with relief refused.

What is the difference between a waiver and a notice of fulfilment?

A notice of fulfilment states that the condition was satisfied – the financing described was arranged. A waiver states that the buyer is giving up the protection whether or not it was satisfied. They are different factual assertions signed by your client. Sending a fulfilment when the truth is a waiver puts an inaccurate document on the file, and it gets read closely if the deal later fails.

What happens to the deposit if the financing condition fails?

The deal ends, but the money does not move on its own. A brokerage holding a deposit may release it only on a written direction signed by all parties to the agreement, or on a court order. There is no automatic return. A formal mutual release is not strictly required; the written direction is. Get it signed while the parties are still on speaking terms.

Does a low appraisal let my buyer out of the deal?

Only if a live condition catches it. Lenders generally advance against the lesser of price and appraised value, so a shortfall lands on the buyer’s down payment. A dollar-amount or percentage financing condition can fail on that basis while it is still running. Once waived, the appraisal gap is the buyer’s cash problem, and whether anything else assists is a question for their lawyer.

The clause checklist I make my own agents use

A one-page pre-submission check for conditions and schedules — the dates, the notice route, and the eight things that get missed. Built for Ontario agents. Free, and there is no drip campaign behind it.

Separately — if you have ever wondered what your last twelve months would have paid on a different split, run it through Quantum Leap. Six questions, no signup wall.

Who reads your waiver before it goes out?

Financing waivers are the most expensive document an agent signs off on, and they usually go out alone, late in the day. At my brokerage the condition documents get a second reader before delivery, and the lender letter gets read rather than summarised. If nobody is doing that for you, come have a conversation.

Book a 15-minute call or call or text 833-330-1925.

If the honest answer is that your current brokerage is fine, I will tell you that.

Financing Condition Ontario: Wording, Deadlines and the Cairo Case