Origination Fee

An origination fee is a charge a lender applies for arranging a mortgage, often calculated as a percentage of the loan amount. In Canada the same idea may appear under names such as an arrangement fee, administration fee, lender fee, or commitment fee on a mortgage commitment. It is distinct from closing costs such as legal fees, title insurance, and land transfer tax, which are paid to third parties rather than to the lender.

How These Fees Appear in Canada

Canadian mortgages do not follow one standard fee schedule. Chartered banks, credit unions, and monoline lenders each set their own charges, and the wording varies by institution. A fee may be quoted as a flat amount or as a percentage of the mortgage principal, and may be collected on approval, at funding, or held back from the advance.

• Arrangement or administration fee — a lender's internal charge for setting up the file.
• Commitment fee — sometimes charged to hold a rate and terms; it may be credited back when the mortgage funds.
• Broker fee — paid to a mortgage broker rather than the lender, more common where a lender pays the broker less than usual or the file falls outside standard guidelines.
• Private and alternative lending fees — often quoted as a percentage of the loan, frequently alongside a separate lender fee.

Why It Matters to a Borrower

A fee expressed as a percentage scales with the size of the mortgage, so the same quoted rate produces a larger charge on a bigger loan. Fees also reduce the net amount advanced, which matters when the funds are needed to complete a purchase. Because the charge forms part of the cost of borrowing, it is one reason the annual percentage rate can sit above the posted interest rate. Lenders must disclose the cost of borrowing, and the federal Financial Consumer Agency of Canada publishes guidance on mortgage costs and disclosures. Federally regulated lenders also operate under OSFI Guideline B-20, which sets expectations for residential mortgage underwriting.

Checking and Comparing Fees

Ask for the fee in writing before signing, and confirm whether it is refundable if the deal does not close, whether it is deducted from the advance, and whether it can be financed into the mortgage balance. Where the loan-to-value ratio is close to the limit for mortgage default insurance, adding a fee to the balance may not be permitted. Comparing total cost — rate, fees, and penalties together — is more reliable than comparing rates alone; see the guide on how to compare mortgage rates.