Commitment Letter

A mortgage commitment letter is a lender's formal written approval confirming that it will advance a mortgage loan at a specified interest rate, amount, amortization, and term, subject to stated conditions such as confirming the borrower's employment, obtaining a satisfactory property appraisal, and providing a fire insurance binder. In British Columbia, buyers typically use a signed commitment letter as evidence that their financing condition has been satisfied before removing a financing subject clause from an accepted Contract of Purchase and Sale. The commitment letter is not a guarantee of funds until all lender conditions are met and confirmed in writing.

Under standard BC practice, an offer to purchase commonly includes a subject-to-financing clause that gives the buyer a defined period to secure acceptable mortgage financing. A signed commitment letter from the lender is the usual evidence a buyer relies upon before waiving or removing that financing subject in writing. Under the Real Estate Services Act (RESA) and BCFSA guidance, a licensee must not pressure a client to remove a subject without the client's fully informed decision, and buyers should carefully confirm that every condition listed in the commitment letter has been satisfied before removing the clause.

Common conditions include confirmation of income and employment, a satisfactory appraisal of the property at or above the purchase price, proof of fire and property insurance, confirmation that title is clear of unacceptable encumbrances, and sometimes a satisfactory review of strata documents if the property is a strata lot under the Strata Property Act (SBC 1998, c. 43). Each condition must be satisfied to the lender's satisfaction before funds will be advanced; if any condition remains unsatisfied, the commitment is void and financing may not proceed. Buyers should review every condition with their mortgage professional and, where appropriate, their legal counsel.

Under the Real Estate Services Act (RESA) and regulations administered by the British Columbia Financial Services Authority (BCFSA), a licensee acting for a buyer has a duty to act in the client's best interests, including ensuring the client understands the implications of removing a financing subject. A licensee should alert the buyer to review every condition in the commitment letter carefully and may recommend the buyer confirm with their lender that all conditions are fully satisfied before removing the subject. A licensee is not a mortgage professional and should not interpret the lender's conditions on the client's behalf.

No — a commitment letter is a conditional approval, not an unconditional guarantee of funds. If any condition listed in the letter (such as a satisfactory appraisal, confirmed employment, or acceptable fire insurance) is not fulfilled to the lender's satisfaction before the completion date, the lender may decline to advance funds. Buyers in British Columbia should ensure every condition is met and obtain written confirmation from their lender before removing a financing subject and proceeding toward completion.

When a lender requires a satisfactory appraisal as a condition of its commitment letter, the appraiser's opinion of value must meet or support the purchase price and loan-to-value ratio acceptable to the lender. If the appraised value comes in below the purchase price, the lender may reduce the approved loan amount, require the buyer to make up the shortfall, or void the commitment altogether. Buyers should factor this risk into their financing subject timeline and negotiate sufficient time for the appraisal to be completed before the subject removal date.

Commitment letters contain an expiry date by which the buyer must accept the lender's terms, and separately, the rate-hold period may expire before or after the commitment itself. If a buyer's completion date extends beyond the rate-hold or commitment expiry — due to amendments to the Contract of Purchase and Sale or delays — the lender may require a new application, updated conditions, or a revised interest rate. BC buyers should confirm with their mortgage professional that the commitment letter's terms remain valid through the anticipated completion date.

Yes — personal financial information such as income details, credit information, and identification data contained in or related to a commitment letter is protected under British Columbia's Personal Information Protection Act (PIPA). Licensees and others who handle such information must collect, use, and disclose it only for purposes the individual would reasonably expect and with appropriate consent. Buyers should be aware that sharing their commitment letter broadly — for example, providing it to parties other than those directly involved in the transaction — should be done with caution and an understanding of their privacy rights under PIPA.

When the property being purchased is a strata lot, lenders often impose additional conditions in the commitment letter related to the strata corporation's financial health, such as reviewing the Form B Information Certificate, the strata corporation's budget, the contingency reserve fund balance, and any pending special levies — all governed under the Strata Property Act (SBC 1998, c. 43). A lender may decline to advance funds or alter loan terms if the strata documents reveal significant deficiencies, pending litigation, or an underfunded contingency reserve fund. Buyers purchasing strata lots should ensure their subject removal period is long enough to obtain and review all required strata documents and have the lender confirm its conditions are satisfied.

Once a buyer removes a financing subject in writing, the Contract of Purchase and Sale becomes firm and binding in British Columbia, meaning the buyer is contractually obligated to complete the purchase regardless of whether the lender ultimately advances funds. If the lender refuses to fund because a commitment condition was not satisfied after the subject was removed, the buyer may be in breach of contract and could forfeit the deposit or face a damages claim from the seller. This underscores why BCFSA and RESA guidance emphasizes that buyers must be fully satisfied that all commitment conditions are met before removing a financing subject.