What is a mortgage commitment letter and how binding is it?

A mortgage commitment letter is a written offer from a lender confirming that it will provide a specific loan amount at a stated interest rate and term, subject to conditions you must satisfy before closing. Common conditions include verification of income, a satisfactory property appraisal, and confirmation that title is clean.

The letter is not a guarantee that funds will flow. Lenders typically reserve the right to withdraw if your financial situation changes materially — for example, if you change jobs, take on new debt, or the property appraises below the purchase price. For that reason, never assume financing is final until all conditions are formally satisfied and your lawyer confirms the funds are ready.

Once you receive a commitment letter, your lawyer and mortgage broker should review it together with you. If anything in the letter conflicts with your purchase agreement — rate hold period, closing date, prepayment privileges — raise it immediately. Speak with a lawyer before waiving your financing condition to understand exactly what risks you are accepting.