Getting a mortgage commitment feels like the finish line. Your bank has approved your loan, you’ve got the paperwork and you’re planning your move. But here’s the thing that catches many buyers off guard: a “commitment” isn’t as binding as it sounds.
“People get a commitment from a bank, which sounds like – by the strict definition of the word – they’re committing to your deal. No, it’s just a document called a commitment. They can change their mind the day of closing. It’s like, ‘now we re-evaluated the deal and we’re not funding.’ Well, okay, but we have six hours until closing, and they can just say, ‘We have no legal obligation to you to close this deal.’ That’s nuts.”
That quote from Ontario real estate lawyer Mark A. Epstein describes a nightmare scenario that happens more often than buyers realize across markets in Newmarket, Barrie, Mississauga, and beyond.
How Often Does This Really Happen?
“It happens more than people would think. I can’t say for sure, but we don’t go a week without one of these types of issues happening,” explains Epstein.
While complete mortgage withdrawals are the extreme case, last-minute changes to terms, rates, or conditions happen regularly. These can include:
- Interest rate increases
- Additional fees or lender costs
- New document requirements
- Changed loan-to-value ratios
- Additional conditions that weren’t in the original commitment
Why Banks Can Do This
The harsh reality is that mortgage commitments contain conditions and escape clauses that protect the lender, not you. Common reasons banks withdraw or modify funding at the last minute include:
Re-evaluation of risk: Market conditions change, internal bank policies shift, or they reassess your financial situation.
Property appraisal issues: If the appraisal comes in lower than expected, they may reduce the loan amount or withdraw entirely.
Employment changes: Any change in your employment status – even a promotion that changes your pay structure – can trigger a review.
Market volatility: Economic uncertainty can make banks more conservative about lending.
Internal process failures: Sometimes it’s simply poor internal communication or missed deadlines on the bank’s end.
What Happens When Your Mortgage Gets Pulled
The immediate aftermath is controlled chaos. With hours until your scheduled closing, your legal team springs into action:
Emergency lender search: Calling alternative lenders, private financiers, or mortgage brokers to find replacement funding.
Family and personal networks: Many buyers end up calling family members for emergency loans to bridge the gap.
Rate and term negotiations: Alternative lenders often charge significantly higher rates and fees for last-minute deals.
Closing delays: In many cases, your legal team can negotiate an extension to the closing date while new financing is arranged. In these cases, there are often added fees that the purchaser pays to the seller in order to secure the extension
Storage and moving complications: If you’re in a chain of transactions, delays can mean paying for storage, temporary accommodations, or rescheduling moving companies.
Real-World Example: When Rates Double Overnight
Recent cases show how volatile last-minute financing can be. In one transaction, a private lender wanted $35,000 in fees and changed the interest rate from 4.9% to 8.5% – then an hour later, switched back to the original terms.
This kind of uncertainty creates enormous stress for buyers who thought their financing was locked in.
How to Protect Yourself
While you can’t completely prevent mortgage withdrawal, you can reduce your risk:
Maintain financial status quo: Don’t change jobs, make large purchases, or take on new debt between approval and closing.
Stay in communication: Keep your mortgage broker informed about any changes in your situation.
Have a backup plan: If possible, identify alternative lenders or family loan options before you need them.
Understand your timeline: Know your closing date well in advance and push for early funding confirmation.
Work with experienced professionals: Real estate lawyers who’ve handled mortgage crises can move quickly when problems arise.
The Legal Reality
Here’s what many buyers don’t understand: if your mortgage gets pulled and you can’t close on time, you’re potentially in breach of your purchase contract. The sellers aren’t required to wait for you to find new financing, and you could lose your deposit.
This is why having an experienced legal team matters. When banks pull funding at the last minute, you need lawyers who can negotiate extensions, explore alternatives, and protect your interests under extreme time pressure.
Moving Forward
Mortgage commitments aren’t guarantees, but they’re still your best path to homeownership. Understanding the risks helps you prepare for problems and react quickly when they arise.
If you’re facing a mortgage crisis or want to understand how to protect yourself in real estate transactions, contact us to discuss your options and get experienced guidance through the process.
