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When you refinance your home, one of the most important documents you'll receive from your lender is the commitment letter. It confirms that the lender is prepared to offer you a new mortgage and outlines the terms and conditions you must meet before funds can be advanced. Understanding this document is essential --- it ensures you know exactly what you're agreeing to and what steps are required to complete your refinance smoothly.
What a commitment letter actually is
A commitment letter is a written confirmation from your lender that they are willing to approve your mortgage loan, provided certain conditions are satisfied. It acts as the foundation of your refinance: once you sign it, both you and the lender are agreeing to move forward based on the terms it contains.
Your lender will later issue detailed instructions to your lawyer, and those instructions are based directly on what appears in the commitment letter. That's why reviewing this document carefully is such an important early step in the process.
What's included in a commitment letter
Although every lender presents the information differently, most commitment letters contain the same core components.
The first section typically outlines your mortgage terms --- the loan amount, interest rate, amortization period, and payment frequency. These details determine your monthly payments and the long-term cost of borrowing. The commitment letter will also outline any lender fees, such as appraisal or administration charges, and whether those amounts will be deducted from the mortgage funds on closing.
Most commitment letters include a section describing what you must do before the mortgage can be advanced. While the specific requirements vary from lender to lender, some common conditions include:
Providing updated income documents
Supplying proof of property insurance
Confirming property tax payments
Sharing statements for any debts being paid out through the refinance
These conditions are mandatory, and your refinance can't proceed until they are addressed.
Why it matters
The commitment letter is important because it creates clarity for both you and your lender. For you, it outlines your mortgage obligations and helps you understand what the refinancing process will look like. For your lender, it confirms that you agree to the terms and provides a framework for the documents they will prepare.
Once you accept the commitment letter, you are committing to the mortgage on the terms described. This makes it especially important to review the letter carefully and ask questions about anything that is unclear.
What happens after you sign it
Once you sign your commitment letter, your lender begins verifying the documents you have provided. They will then send formal instructions to your lawyer. This is where Ownright comes in. These instructions guide us in preparing the new mortgage, arranging for the old mortgage to be discharged, and ensuring that all lender conditions are satisfied before closing.
After we prepare the required documents, the Ownright team will meet with you to sign everything. On closing day, your new mortgage is registered on title, your old mortgage is paid out, and any remaining funds from the refinance are released to you.
The bottom line
A commitment letter is more than just an approval — it is the blueprint for your refinance. It explains your mortgage terms, outlines the lender’s expectations, and sets out the conditions that must be completed before funds can be advanced. Understanding this document helps ensure that your refinance progresses smoothly and predictably.
At Ownright, we help clients review their lender’s instructions and ensure that all requirements are met so their refinance closes on time and without surprises.
