Commitment Fee

A fee lenders charge their borrowers for unused credit or credit that has been promised at a specified future date.

Investopedia Says:
A commitment fee is different from interest; although, the two are often confused. A lender charges a borrower a commitment fee to keep a line of credit open, or to guarantee a loan at a certain future date even though the credit is not being used at that particular time.

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Lender's charge for holding credit available. The fee may be waived for some borrowers, and usually is replaced with interest when funds are advanced, as in a Revolving Credit. In business credit, commitment fees often are charged for an unused portion of a Line of Credit.

A charge required by a lender to lock in specific terms on a loan at the time of application.
Example: When Collins applied for a loan to finance the apartment building she wanted to buy, the mortgage banker agreed to make the loan, at an interest rate of 7% with 2 discount points and covering 80% of value, in exchange for a commitment fee of 1% of the loan amount.

Compensation paid to a lender by a borrower for the lender's promise to give a mortgage at some future time.

A commitment fee, frequently employed in real estate transactions, is an expense separate from interest charged on the loan to be secured by the mortgage. The controversy surrounding nonrefundable commitment fees arises when a borrower decides not to proceed with the loan and then demands return of the fee on the premise that the lender has performed no services to earn it. The courts have consistently rejected this contention and held that the lender is entitled to the commitment fee either as liquidated damages for breach of contract or as compensation for earmarking the funds for loan to the borrower.