Pre-Authorized Payment Agreement

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What Is a Pre-Authorized Payment Agreement?

If your mortgage lender has asked you for a Pre-Authorized Payment Agreement and you’re wondering what it is or why it matters, you’re in the right place.

Whether you’re buying a home, refinancing, or renewing a mortgage, most Canadian lenders will ask for this agreement as part of the banking information needed to set up your mortgage payments. It helps your lender pull your mortgage payments automatically from your bank account — on time and without you having to initiate the transfer each month.

What Exactly Is a Pre-Authorized Payment Agreement?

A Pre-Authorized Payment Agreement (sometimes referred to as a PAD agreement) is a written authorization you give your lender allowing them to automatically withdraw your regular mortgage payments directly from your bank account. With this agreement in place, your lender doesn’t need you to manually send payments every month — they’re set up to be debited automatically on a schedule you and your lender agree to.

This type of agreement provides peace of mind: you won’t forget a payment, you avoid late payment fees, and it helps keep your mortgage in good standing with your lender.

Why Do Lenders Ask for It?

Here’s why a Pre-Authorized Payment Agreement is commonly requested:

  • Ensures payments are made on time — automatic withdrawals help you avoid missed or late payments.
  • Reduces paperwork & manual steps — your lender doesn’t need to chase you for monthly transfers.
  • Prevents errors — your banking details are verified once during setup, which helps avoid typos or misdirected payments.

In short, it helps keep your mortgage payment process smooth and predictable — for both you and the lender.

What Your Agreement Will Include

When you complete your Pre-Authorized Payment Agreement, it will typically outline:

  • Your banking details — the account the payments will be withdrawn from.
  • Payment amount — either a fixed amount (your regular payment) or in some cases a variable amount if agreed.
  • Payment frequency — usually monthly but based on your mortgage terms.
  • Authorization terms — your signature serving as permission for the lender to debit the account.

What If You Change Your Bank Account?

If you switch banks or change your account information after your agreement is set up, you’ll need to provide updated banking information to your lender so future withdrawals continue without interruption. Most lenders will provide a new form to re-authorize automatic payments from your new account.

Can You Cancel the Agreement?
Yes — you can cancel a Pre-Authorized Payment Agreement at any time by giving written notice to your lender. Just keep in mind:

  • Cancelling the payment agreement doesn’t cancel your mortgage. You’ll still be responsible for making payments by another method.
  • Be sure you make other arrangements, so your monthly mortgage payment isn’t missed.

Need Help with Mortgage Paperwork?

At Red Key Mortgage, we help clients through every step of the mortgage process—from approval to funding. If you’re unsure which documents to submit or need help gathering your paperwork, we’re just a phone call or email away.

Reach out today and we’ll walk you through it, one step at a time.

Contact Red Key Mortgage today — we’ll walk you through every step of the approval process.

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