How Late Can Banks Send Mortgage Instructions to Lawyers?
Purchasing a home involves many moving parts including writing an offer with your Realtor, securing a mortgage through a banker or broker and then signing the purchase and mortgage documentation with a lawyer. To make it to the final step in the transaction, signing at the lawyer’s office, your lawyer needs to receive mortgage instructions from the lender. These instructions outline the terms of your mortgage and are essential for closing the deal.
But how late can the bank send these instructions to your lawyer in Canada? The short answer is that there is no specific deadline for when the bank must send mortgage instructions to your lawyer.
Although every bank has a different process, there are some general guidelines for how instructing the lawyer works:
If you complete your mortgage and then your deal isn’t closing for several months, you should expect that your lender will instruct the lawyer 30 days before your transaction.
If you purchase a home with a quick closing (less than 30 days), the lender will be working hard to get the instructions to the lawyer at least 5 business days before closing (the day you get the keys).
Lawyers are working with hundreds of clients in a month, so they need at least a week to accommodate schedules and make sure they have time to prepare the file before you arrive at their office for signing.
What Are Mortgage Instructions?
"Mortgage instructions" are detailed directions provided by a lender to the lawyer handling the closing of a real estate transaction. These instructions outline the terms and conditions that must be met in order for the mortgage to be funded.
Generally, mortgage instructions may include information such as:
The mortgage amount: This is the principal amount that the borrower is agreeing to repay.
Interest rate and terms: These include the interest rate, whether it's fixed or variable, and the duration of the loan.
Payment details: This includes the frequency of payments, such as monthly, biweekly, etc., and whether there are any prepayment options.
Legal description of the property: This is a detailed identification of the property being mortgaged.
Borrower and lender information: This includes the legal names and contact details of both parties.
Conditions to fund: These are specific requirements the borrower must fulfill before the lender will provide the funds. This might include purchasing homeowner's insurance or paying off specific debts.
Special conditions: These can be any additional stipulations set by the lender, such as requiring title insurance or a satisfactory property appraisal.
These instructions guide the lawyer in preparing the necessary legal documents and ensure all the lender's requirements are met before the mortgage is funded. Failure to adhere to these instructions may result in a delay or failure in funding the mortgage.
How Late Can Banks Send Mortgage Instructions to Lawyers?
Banks or lenders don't have a specific time frame for sending mortgage instructions to a lawyer. However, they usually try to send them as soon as they can so that the lawyer has plenty of time to go through all of the conditions and requirements to finalize the mortgage and have the clients into the office to sign everything in ink.
Usually, banks send the instructions to lawyers at least five business days before the closing date or even earlier, when possible.
What Happens if the Mortgage Instructions Are Late?
If the bank sends the mortgage instructions to your lawyer late, it can cause delays in the home buying process.
Your lawyer won't be able to prepare the necessary legal documents until they receive the instructions, which means that the closing date may need to be extended to a later date.
Make sure to stay in touch with your lawyer (or have your mortgage broker do this on your behalf) so that you can all work together to complete your deal on time.
Factors Affecting Mortgage Instruction Delivery Time
Time from Offer to Close
Many clients write offers on properties and want to get the keys within weeks. Unfortunately, this is often not realistic.
If you write an offer on June 1st, it is difficult to complete the mortgage, instruct the lawyer, sign the documents and collect the keys before July 1st. Typically, this is how the timeline looks:
Step 1: Write of offer (sometimes there is back and forth between buyers and sellers for a few days before they settle on the final terms of the loan (2 days).
Step 2: Provide the final signed offer and MLS listing to your mortgage broker. Work with your broker to make sure you’ve provided up to date documentation, like letters of employment and paystubs (2 days).
Step 3: The Mortgage broker submits the deal to a financial institution and waits for a “firm” mortgage commitment. Depending on volume levels, this could take 1-6 business days.
Step 4: Obtain your firm mortgage approval and review the terms & conditions with your mortgage broker. Provide your mortgage broker with all remaining required documentation and sign the mortgage commitment (2-5 days).
Step 5: Your mortgage broker will package all of the documents and send them back to the lender to be reviewed. Typically, document review takes about 5 days. Once the file is “broker complete,” meaning the lender has received everything the broker was asked to provide, only then will they send the mortgage instructions to the lawyers office.
Step 6: The lawyer receives, reviews, and then prepares the mortgage instructions for signing (2 days).
Step 7: You meet with the lawyer to review the legal mortgage documents and sign them in ink. (As long as it takes to book an appointment with you, 1-5 days).
Step 8: The lawyer sends the documents to the lender and requests the mortgage funds. The lender usually asks for a request for funds 2 business days prior to advancing them to the lawyer’s trust account.
As you can see, there are many steps required to close your transaction, so wanting to close a deal in 3 weeks could result in very late instructions arriving at your lawyer’s office and a delay in closing.
Quality of your Mortgage Pre-Approval
If you completed a high-quality mortgage pre-approval with an experienced mortgage broker, turning around your deal quickly should not be an issue. The mortgage broker should understand your:
Income (how you make your money)
Down payment (where it is coming from and how much you are putting down)
The property type (condo or freehold, rural or urban, etc)
Your requested mortgage terms (rates, products, term length, etc.)
If you have not worked with a mortgage broker that collected documentation and completed a comprehensive discovery call to understand your needs at the pre-approval stage, it is likely that your mortgage will take much longer. This can result in a delay in getting mortgage instructions to your lawyer’s office.
Your Response Time
Asking for more documentation is the worst part of every mortgage broker’s job. If your mortgage broker is asking you to provide additional information, it’s because the lender needs it in order to fund your deal.
Each day that you delay providing the requested documentation is a day that your file is not being touched. Providing requested documentation as quickly as possible is the best way to ensure that your mortgage file is instructed to the lawyer on time and your deal closes without issue.
Mortgage Conditions
Different mortgages can come with different conditions and some of these conditions take time to complete. For example, your lender might require that your property be appraised.
Depending on the market that you are transacting in, the appraiser could be booking out 2 weeks. We saw this in parts of Ontario in 2020 and in Alberta in the summer of 2021. Other conditions might require a document from CRA or documents signed by an accountant.
These types of conditions can take several days to complete.
How to Make Sure Your Mortgage Instructions Are On Time
To help make sure your mortgage instructions are on time, it’s important to work closely with your mortgage broker. If your mortgage broker asks for documentation or asks you to sign something, doing this quickly can help make sure your mortgage instructions are ready as soon as possible.
Communicate with your mortgage broker when you are planning on purchasing your house and how quick of a close you are looking for. For example, a closing date of 3 weeks leaves a lot less time for mortgage instructions than a closing date 2 months away.
As soon as your offer on a home is accepted, let your mortgage broker know. You can also let them know ahead of time if you’re planning on a quick close, so that you can work together to be prepared.
For any other questions about mortgage instructions, contact the mortgage experts at Spire Mortgage. We’ll walk you through every step of the mortgage process, from pre-approval to final approval.
