Commitment Letter

Form letter from a lender stating willingness to advance funds to a named borrower, repayable at a specified rate and time period. This is a common notice in loans that are real estate secured, such as home equity lines of credit and second mortgages, subject to an escape clause allowing the lender to rescind the agreement in event of materially adverse changes in the borrower's financial condition.

An official notification to a borrower from a lender indicating that the borrower's loan application has been approved and stating the terms of the prospective loan.
Example: When Standard Mortgage Company completed the loan approval process, they sent Collins a commitment letter to inform her of the results. The letter then became a binding promise of Standard's intention to grant Collins the loan at the terms stated.