Are there upfront fees when I get a mortgage commitment in Ontario?

Different lenders charge different upfront fees, and the practice varies considerably. Institutional lenders — major banks and credit unions — generally do not charge a commitment fee to issue a mortgage commitment letter. However, they typically require an appraisal of the property, and the cost of the appraisal is usually paid by the borrower; it can range from a few hundred to over a thousand dollars depending on property type and location.

Private lenders and some alternative lenders are more likely to charge upfront commitment fees, sometimes called lender fees or processing fees. These are in addition to any appraisal costs. Some private lenders also charge a broker fee if they are arranged through a mortgage broker, though in many cases broker compensation comes from the lender rather than the borrower.

Understanding all fees before you commit to a lender is important. The total cost of a mortgage includes the interest rate, the lender fee, the broker fee (if any), the appraisal cost, legal fees, and — if applicable — mortgage default insurance premiums. Getting a detailed fee breakdown from your mortgage broker in writing before you proceed lets you compare different financing options on a true apples-to-apples basis. Your lawyer can also clarify which fees appear as closing costs in the statement of adjustments.