A mortgage contract is a legally binding contract. When you and a lender sign the mortgage documents, you agree to the risks and the responsibilities outlined in the contract. These documents can be complicated. It’s important for you to understand your mortgage contract because there are significant consequences if you fail to meet the terms of the contract.

To help, here are some tips to help you understand what to expect in the process and some explanations about the covenants or obligations outlined in the mortgage contract you sign.

Always read your contract

Read all of the information provided. When you don’t understand a concept or a clause, be sure to ask questions. You may also wish to seek legal advice before signing a mortgage contract.

Know what you are signing

Before receiving the full mortgage contract, you will receive a letter of commitment (also known as an approval letter). It signifies that financing has been officially approved and represents a formal, binding contract between you and the lender once signed. This letter outlines the terms and conditions of the loan. It serves as the contract that initiates an official loan borrowing process.

Preapproval vs. Mortgage contract

When a lender preapproves you for a mortgage, it is not a guarantee that they will enter into a mortgage contract with you. A preapproval means the lender is interested in offering you a mortgage. A lender might choose not to offer you the mortgage after closely assessing you or the property. 

Read this letter carefully since it will contain information about terms and conditions of the mortgage contract. It will also contain information about fees and charges payable by you as the borrower. Important mortgage terms could include and not limited to:


Amount of the loan


Interest rate


Repayment terms and period




Any fees incurred in the transaction


Closing conditions

Material clauses of a Mortgage Contract

If you use a mortgage broker or agent to find your mortgage loan, they are required to disclose to you the material risks of your mortgage in writing and in plain language. You are also allowed to have at least two business days to review a mortgage disclosure statement before you sign a mortgage contract with a mortgage broker or agent or sign a mortgage instrument, whichever is earlier.

Mortgage contracts can have different clauses based on the borrower-lender relationship, but they all have the same core promises, known as covenants, as outlined below.