What Are Mortgage Instructions and What Does My Lawyer Do With Them?

Key takeaways

• Mortgage instructions are the lender’s written conditions your lawyer generally needs to satisfy before your mortgage money is advanced — though a lender can waive or vary its own conditions.
• Typical requirements: investigate title, register the lender’s charge, confirm insurance naming the lender, and verify your identity as the Law Society’s by-laws require.
• Your lawyer is normally retained by the lender as well as by you. That joint retainer has rules attached, including that nothing you tell the lawyer about the transaction can be kept from the lender.
• If a condition is unmet, the lender may decline to release the funds and closing can be delayed — subject to your lender’s conditions.

What are mortgage instructions?

Mortgage instructions are the set of conditions your lender sends to your lawyer once your mortgage is approved. In plain terms, they’re the lender’s checklist — the list of things that generally need to be true and done before it will hand over the money to buy your home.

Here’s the sequence. You apply for a mortgage. The lender approves you. But that approval isn’t a blank cheque. The lender wants proof that its loan is safe and properly secured before it actually releases the funds. So instead of sending the money straight to you, it usually sends detailed instructions to your lawyer — the person who will handle the legal side of your purchase.

These instructions are a formal document, and they’re specific to your deal. Your lawyer treats them as marching orders. In an ordinary Ontario residential purchase your lender will require a lawyer to act for it as well as for you, so the same lawyer usually has two clients on the same file.

What does your lawyer have to do with them?

In the ordinary course, the lender advances the mortgage money once it is satisfied its conditions have been met. Lenders can and do waive, amend or defer a condition, and can add one late in the day, so the instructions your lender actually issues are what control. The exact conditions vary by lender, but they usually include the following.

• Investigate title. Your lawyer searches the electronic land registry and makes off-title enquiries where the transaction calls for them, then sorts what turns up into permitted encumbrances the lender accepts — a utility easement, for example — and defects that must be resolved before closing.
• Register the mortgage on title. The lender is lending you a large sum, and it wants that loan formally recorded against the property in the public land registry. This registration is what gives the lender its legal claim (its “security”) if the loan isn’t repaid. In an ordinary Ontario residential purchase, your lawyer typically handles this registration and provides the certifications the land registration system requires.
• Confirm you have property insurance naming the lender. The lender generally requires proof that the home is insured and that the lender is named on the policy, so its interest is protected if something happens to the property.
• Verify your identity. Your lawyer confirms you are who you say you are — a standard safeguard against fraud.
• Follow the lender’s specific conditions. Beyond the common items above, each lender may add its own requirements, and your lawyer generally needs to meet those too.

Here’s a simple way to see how the pieces line up.

The key point is that your lawyer generally follows the instructions closely. This usually isn’t a step where anyone improvises or takes shortcuts. The lender has told your lawyer precisely what it needs, and your lawyer’s role is to deliver on it — subject to your lender’s conditions.

Does my lawyer act for me or for the lender?

Usually both. In an ordinary Ontario residential purchase your lender retains the same lawyer you do. That is a joint retainer, and the Law Society of Ontario’s Rules of Professional Conduct set out how it works.

The consequence people find surprising is this: nothing you tell your lawyer about the transaction can be kept confidential from the lender. In a joint retainer, information one client gives the lawyer is not confidential as against the other. So if you tell your lawyer something material that the lender does not know — that part of your down payment is a loan, say, or that the price changed, or that you do not intend to live in the property — your lawyer is obliged to disclose it in writing before the mortgage funds are released. That duty applies whether or not the lender asks.

Institutional lenders are treated differently from private ones at the front end. Where the lender is a bank, trust company, insurance company, credit union or a similar lending client, the Rules deem its consent to the joint retainer to exist once it sends written instructions to act, so your lawyer does not have to obtain a separate signed consent from it. You, the borrower, still receive the full explanation and give your own consent. Private lenders are a different matter, and the Law Society directs lawyers to exercise particular caution there.

If a genuine conflict develops between you and the lender, the lawyer generally cannot advise either of you on the contested point and may have to stop acting for both. That sounds dramatic, and in practice it is rare, but it is the reason lawyers raise these problems early rather than trying to work around them.

Why does the lender make these conditions?

Because the lender is trusting a lot of money to a purchase it isn’t physically present for. It never sees your house, meets you in person, or watches the deal close. Its protection comes from the conditions it sets and from the lawyer who confirms they’ve been met.

Think about what each condition protects:

• Investigating title helps make sure the lender isn’t lending against a property tangled up in someone else’s claims.
• Registering the mortgage gives the lender a legal foothold on the property, so it has recourse if the loan isn’t repaid.
• Insurance naming the lender protects the value behind the loan — if the home is damaged, the lender’s interest is covered.
• Identity verification guards against fraud, protecting both the lender and you.

None of this is red tape for its own sake. Each condition closes off a specific risk, and together they let the lender release a large sum with confidence. Your lawyer is generally the trusted party who confirms, in writing, that everything is in order.

What happens if a condition isn’t met?

The money usually doesn’t move. This is the part that surprises some buyers: mortgage approval and mortgage funding are two different milestones. Being approved means the lender is willing to lend to you. Being funded means the money is actually released, and that normally happens once the lender is satisfied its conditions are met. A lender may also choose to waive or defer a condition rather than hold up funding — that is the lender’s call, not your lawyer’s.

If a condition is outstanding, the lender may decline to advance the funds. And if the funds don’t arrive on time, closing can be delayed — because on closing day, that mortgage money is usually a big part of what pays for the home.

Common examples of conditions that can hold things up include missing proof of insurance, a title issue that hasn’t been cleared, or identity documents that haven’t been provided. None of these are unusual, and most are resolved quickly — but each one generally has to be done before the lender will act.

That’s why your lawyer typically works through the instructions carefully and ahead of time. The goal is to have every condition met so the funds are ready to flow on closing day, not scrambled together at the last minute.

What you can do to help

You’re not expected to satisfy the lender’s conditions yourself — that’s your lawyer’s job. But a few things on your side keep the process smooth:

• Arrange your home insurance early, and make sure the lender is named on the policy. This is a frequent last-minute snag.
• Respond quickly when your lawyer asks for identification or documents. The sooner they have what they need, the sooner conditions get met.
• Keep your lawyer and lender in the loop if anything about your mortgage changes before closing.

Do those, and you make it far easier for your lawyer to check off the lender’s list on time.