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A commitment fee is a charge some lenders apply to guarantee that funds will be available, or to hold approved terms for a set period — most often seen on construction, commercial, or extended-hold mortgage financing rather than standard residential deals.
Most residential lenders offer a free rate hold for a set number of days as a matter of course. A commitment fee goes further — it's a specific charge, sometimes on undrawn construction funds or an extended commercial commitment, that compensates the lender for reserving capital whether or not the deal ultimately funds.
Depending on the lender and product, a commitment fee may be credited back at funding, partially refunded, or forfeited if the borrower doesn't proceed — which makes the fine print worth confirming before a broker recommends a lender charging one. It's distinct from a lender fee, which is only charged once a deal actually closes.
More common on construction and commercial deals: commitment fees show up more often on construction mortgages and commercial financing than on standard bank or monoline residential deals, which usually offer free rate holds instead.
Must be disclosed: like other fees, a commitment fee has to be disclosed to the borrower under provincial cost-of-borrowing rules before the client commits to the deal.
Can apply even if the deal doesn't close: unlike a lender fee charged at funding, some commitment fees are earned by the lender simply for reserving the funds, regardless of whether the file ultimately closes.
Refund terms vary by lender: brokers should confirm in writing whether a given lender's commitment fee is refundable, creditable toward closing costs, or forfeited if the client walks away.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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