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What is a commitment letter?

To Payout Do We Part

Just like every contract, or commitment, when you sign your mortgage, you have promised to be accountable.  The question that all of you should be asking, before you choose to sign your name on that commitment form is: do I really know what I’m accountable for?

Your mortgage ‘vows’ include four specific promises that you are responsible to uphold until your mortgage is paid in full to the lender.

VOW #1:  Your loan amount, plus accrued interest, is expected to be repaid.

VOW #2:  Property taxes are expected to be paid in full – some lenders go to the extent to require a portion of you annual taxes to be included with each monthly payment.   The lender then pays your taxes from the tax account that they’ve budgeted for you.  This is certainly an arrangement that benefits you.  I encourage you to form your own property tax monthly budget, if your lender does not offer this service.  It saves you from scraping together the lump sum payment, when the taxes come due. If you are accountable for your taxes, your lender will make sure your taxes are indeed paid

VOW #3:  Home Insurance must be purchased to adequately protect your property against fire and other specified hazards.  The policy must state that the property is insured for full value of the property and payable to the specific lender of the mortgage.

VOW #4:  Preserve the value of your real estate, by maintaining the property and keeping it in a reasonable state of repair.

As with any commitment, there is benefit to you for upholding your side of the contract.  If you are accountable, and fulfill your mortgage ‘vows’, your lender in return will:

#1:  Discharge your mortgage upon full repayment.

#2:  Keep their nose out of your business, and allow you to enjoy your property without interference.  Keep in mind that the lender may technically own more of your real estate then you do, depending on how close you are to ‘payout do we part’!

Questions about your mortgage options?  Give me a call!

Blogged by Elise Hildebrandt, AMP Mortgage Associate Broker Lic #316103 at The Mortgage Centre Brokerage Lic #31547, Saskatoon Elise has been in the financial industry for 16 years.  Contact her at: elise@mortgagecentre.com or www.elisehildebrandt.ca

   

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