Short answer
Start with the gross mortgage and subtract every amount paid from the advance: lender fee, brokerage fee, borrower and lender legal costs, appraisal, existing mortgage payouts, taxes or arrears, administration charges and any interest reserve. The remainder is the net amount available for the client’s purpose. A large approval can still leave a cash shortage. Ask for a written trust-funds estimate and cost-of-borrowing disclosure, then compare the net proceeds and total holding-period cost before signing.
Gross approval is not spendable cash
A client hears “approved for $250,000” and expects that amount at closing. The lawyer must first pay the debts and deductions required by the commitment and payout instructions.
A simple illustration
| Gross mortgage | $250,000 |
|---|---|
| Lender fee, 2% | -$5,000 |
| Brokerage fee, 2% | -$5,000 |
| Illustrative legal and appraisal costs | -$4,000 |
| Existing secured debt paid out | -$150,000 |
| Estimated cash remaining | $86,000 |
This is arithmetic only, not a quote. Taxes, adjustments, discharge charges, prepaid interest and other conditions could change the result.
Compare three numbers
- Gross mortgage: the debt registered or advanced.
- Net proceeds: the cash left after required deductions and payouts.
- Total term cost: interest, fees and costs during the expected holding period.
If an interest reserve is deducted, show it separately. It may help monthly cash flow while reducing the money available today.
Before signing
Ask the broker and lawyer to reconcile the commitment, payout statements and estimated trust ledger. Confirm that the remaining cash solves the original need and that the maturity balance fits the exit.
For a cost comparison, request a mortgage second opinion through SimplifyMortgage.ca.