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Summary: A commitment letter is your lender's formal written approval of your refinance. It confirms the lender is prepared to offer you a new mortgage, sets out the terms (loan amount, interest rate, amortization, payment frequency), and lists the conditions you must satisfy before funds can be advanced. Once you sign it, you are agreeing to those terms, and your lawyer works from the lender's instructions to close.
When you refinance your home, the commitment letter is one of the most important documents your lender sends. It is the document that turns a verbal approval into a concrete set of terms and conditions, and everything that follows in your refinance is built on it. Reviewing it carefully is one of the most valuable early steps you can take.
What is a commitment letter?
A commitment letter is a written confirmation from your lender that they are willing to approve your mortgage, provided certain conditions are satisfied. It is the foundation of your refinance: once you sign it, both you and the lender agree to move forward on the terms it contains.
Your lender later issues detailed instructions to your lawyer, and those instructions are based directly on what appears in the commitment letter. That is why reviewing the document early matters so much, as it shapes everything downstream.
What's included in a commitment letter?
Although every lender formats it differently, most commitment letters contain the same core parts: your mortgage terms, any lender fees, and the conditions you must meet. The first section sets out the loan amount, interest rate, amortization period, and payment frequency, which together determine your payments and the long-term cost of borrowing. It also notes lender fees, such as appraisal or administration charges, and whether they will be deducted from the mortgage funds on closing.
Most letters then list what you must do before the mortgage can be advanced. The specifics vary, but common conditions include:
Updated income documents confirming your current financial position.
Proof of property insurance on the home.
Confirmation of property tax payments.
Statements for any debts being paid out through the refinance.
These conditions are mandatory, and your refinance cannot proceed until they are addressed. If your rate or term details are still unfamiliar, our guides on finding the best mortgage rate and fixed versus variable rates explain the terms you will see.
Why does the commitment letter matter?
The commitment letter creates clarity for both sides. For you, it sets out your mortgage obligations and shows what the rest of the refinance will look like. For your lender, it confirms you accept the terms and gives them the framework for the documents they prepare.
Once you accept it, you are committing to the mortgage on the terms described. That is why it is worth reading carefully and asking questions about anything that is unclear before you sign.
What happens after you sign the commitment letter?
After you sign, the refinance moves from approval into closing. Your lender verifies your documents and sends formal instructions to your lawyer, and from there the steps are straightforward:
Your lender sends instructions to your lawyer. This is where Ownright comes in, working from the lender's instructions.
Your lawyer prepares the documents. We prepare the new mortgage, arrange to discharge the old one, and confirm every lender condition is satisfied.
You sign. The Ownright team meets with you to sign everything required.
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.
Frequently asked questions
Is a commitment letter binding?
Once you accept and sign it, you are committing to the mortgage on the terms described. That is why it is important to review the letter carefully and ask about anything unclear before signing, rather than after.
What conditions are usually in a commitment letter?
Common conditions include updated income documents, proof of property insurance, confirmation of property tax payments, and statements for any debts being paid out through the refinance. They are mandatory, and the refinance cannot close until they are met.
What happens after you sign your commitment letter?
Your lender verifies your documents and sends instructions to your lawyer. Your lawyer prepares the new mortgage, arranges to discharge the old one, and confirms the conditions are met. You then sign, and the refinance is registered and funded on closing day.
What does the lawyer do with the commitment letter?
The lender's instructions to your lawyer are based directly on the commitment letter. Your lawyer uses them to prepare the new mortgage, discharge the existing one, satisfy the lender's conditions, and complete registration and funding on closing.
About the author
Benjamin Berry is a co-founder and principal lawyer at Ownright. He works on Ontario residential purchases, sales, and refinances, and writes to make the legal side of a real estate transaction clearer for the people going through it.
At Ownright, we help refinance clients review their lender's instructions and make sure every condition is met so the refinance closes on time and without surprises. You can start your closing online or get in touch with any questions.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
