What is a mortgage commitment letter and when do I need it?

A mortgage commitment letter (sometimes called a mortgage approval letter) is a written confirmation from your lender that it is prepared to advance a specific mortgage amount for a specific property, subject to any remaining conditions the lender sets out. It is different from a pre-approval, which is only a preliminary assessment of your borrowing capacity without a specific property attached.

When you make an offer with a financing condition, the clock starts on the number of days you have to satisfy that condition. During that window, you submit the property's details to your lender, who appraises it and issues the commitment letter once satisfied. Your lawyer or agent will walk you through waiving the condition once you have firm financing in hand.

If you cannot obtain a commitment within the condition period, you can exercise your right to terminate the agreement and recover your deposit. It is important to act quickly — waiting until the last day of the condition period to contact your lender leaves little room to address any issues the lender raises.