Mortgage Commitment

A Mortgage Commitment Letter is a written document issued by a lender confirming it is prepared to advance mortgage funds to a borrower on specified terms, including the interest rate, payment amount, term, amortization period, prepayment privileges, fees, and total cost of borrowing. In BC, federally regulated lenders must provide this disclosure in compliance with the Bank Act Cost of Borrowing Regulations, while provincially regulated lenders such as credit unions must meet equivalent provincial disclosure requirements. The commitment letter forms part of the conveyancing file assembled by the notary or solicitor acting on the transaction at completion.

When a buyer in British Columbia includes a subject-to-financing condition in a Contract of Purchase and Sale, the Mortgage Commitment Letter is typically the document that satisfies that condition, as it confirms the lender's willingness to advance funds on agreed terms. Once the buyer receives a satisfactory commitment, they remove the financing subject before the stated deadline, making the contract unconditional on that point. If no satisfactory commitment is obtained and the condition is not waived, the contract is generally at an end and the deposit is returned to the buyer in accordance with the contract terms.

A Mortgage Commitment Letter is a conditional offer by the lender, and its binding nature depends on the terms stated within it; lenders typically include conditions such as satisfactory appraisal, title review, and confirmation of the borrower's financial circumstances remaining unchanged. If those conditions are not met, the lender may withdraw or modify the commitment before mortgage documents are signed. Borrowers should review the commitment carefully with their legal counsel or mortgage broker, as the specific terms govern the lender's obligations under contract law principles applied by BC courts.

Under the Real Estate Services Act (RESA) and BCFSA requirements, a BC real estate licensee must act in the client's best interests and provide competent service, which includes advising a buyer client to review a financing subject carefully and to obtain a Mortgage Commitment Letter before removing that subject. Licensees must not provide mortgage advice beyond their scope of expertise and should direct clients to a qualified mortgage broker, lender, or legal professional for interpretation of commitment terms. Licensees are not parties to the mortgage commitment itself and must not handle or hold mortgage commitment funds, which are subject to the lender's own disbursement process.

Federal law under the Bank Act Cost of Borrowing Regulations requires federally regulated lenders to disclose, before the mortgage is finalized, the annual percentage rate, total interest payable, payment schedule, and all fees associated with the mortgage, ensuring borrowers can make an informed comparison. Provincially regulated lenders in BC, such as credit unions, are subject to equivalent provincial disclosure requirements administered by the BC Financial Services Authority (BCFSA). This disclosure, provided alongside or as part of the Mortgage Commitment Letter, functions similarly to the US Closing Disclosure by consolidating borrowing costs in one readable document before final mortgage documents are executed.

A Mortgage Commitment Letter itself does not alter the Property Transfer Tax (PTT) owing, which is calculated under the BC Property Transfer Tax Act based on the fair market value of the property at the time of registration. PTT applies at 1% on the first $200,000 of fair market value, 2% on the portion from $200,001 to $2,000,000, 3% on the portion from $2,000,001 to $3,000,000, and an additional 2% on the residential portion exceeding $3,000,000. Exemptions such as the First-Time Home Buyers' Program (full exemption for eligible buyers up to $835,000) or the Newly Built Home Exemption (up to $1,100,000) are based on purchaser eligibility and property value, not on the financing structure confirmed in the commitment letter.

When the property being financed is a strata lot under the Strata Property Act (SBC 1998, c. 43), the lender will typically require the buyer to provide strata documents — including the Form B Information Certificate, strata plan, bylaws, current budget, depreciation report if available, and Form F Certificate of Payment — to confirm there are no outstanding strata fees, special levies, or encumbrances that could affect the lender's security. The Mortgage Commitment Letter may include conditions specifically referencing satisfactory review of these strata documents before funds are advanced. Buyers and their legal counsel review these materials as part of due diligence before the commitment conditions are considered fulfilled.

The terms set out in the Mortgage Commitment Letter — including the interest rate, payment obligations, and prepayment terms — are incorporated into the formal mortgage instrument registered on title, and it is that registered mortgage that governs enforcement if a borrower defaults. In British Columbia, foreclosure is a judicial process conducted through the BC Supreme Court under the Law and Equity Act and BC Supreme Court Civil Rules; lenders cannot use a US-style power-of-sale process, and must instead apply to the court for an Order Nisi and ultimately an Order Absolute or judicial sale. The commitment letter's terms are therefore significant because they define the monetary obligations whose breach can trigger the court foreclosure proceedings.

Personal financial information contained in a Mortgage Commitment Letter — such as income verification, credit details, and debt obligations — is protected under BC's Personal Information Protection Act (PIPA), which requires that personal information be collected, used, and disclosed only for purposes a reasonable person would consider appropriate in the circumstances, and generally only with the individual's consent. A lender or mortgage broker may share the commitment letter with a real estate licensee only if the borrower has consented to that disclosure, or if disclosure is otherwise permitted under PIPA. Borrowers should be aware of what they authorize when signing consent forms with their lender or mortgage broker.

If a Mortgage Commitment Letter expires before the scheduled completion date, the buyer should promptly contact their lender or mortgage broker to request a renewal or extension of the commitment, as an expired commitment means the lender is no longer obligated to advance funds on the original terms. The buyer should also advise their legal counsel — notary or solicitor — who is managing the conveyancing file, as the completion date in the Contract of Purchase and Sale may need to be renegotiated with the seller if funding cannot be confirmed in time. Failure to complete due to a lapsed mortgage commitment could expose the buyer to legal remedies available to the seller under the contract, so early communication is essential.