The deposit is refundable to the borrower less the lender's actual third-party costs incurred when the deal does not close due to lender failure to issue commitment, lender repricing outside agreed parameters, or property issues outside borrower control. Forfeiture is whatever the term sheet says. On the common institutional form, the deposit is forfeited when the borrower walks after a commitment that matches the term sheet, not merely after a desk-level credit indication.
Read the deposit paragraph word-by-word
Most term-sheet deposit clauses contain three categories of refundability. Borrower-walk: deposit forfeited in full once the lender has issued commitment in accordance with the term sheet. Lender-walk: deposit refunded in full, less actual third-party costs, when the lender fails to issue commitment within the agreed timeframe or repricing exceeds the term-sheet parameters. Property/diligence: deposit refunded in full, less actual third-party costs, when third-party reports identify a deal-killing condition outside the borrower's control.
Negotiable points at the term-sheet stage: cap the lender's expense reimbursement to a defined dollar amount (avoid open-ended), require itemized invoices for any third-party costs charged against the deposit, define exactly what constitutes lender-side good-faith in pursuing commitment so a slow-walk does not strip the borrower's refundability, and define what constitutes a deal-killing diligence finding so the borrower retains the right to walk.
Lender hold of the deposit: most institutional lenders hold the deposit in a non-interest-bearing account; some return interest at closing. On a $25K to $100K deposit held for 60 to 120 days the difference is modest, but the principle is worth establishing.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) · Board of Governors of the Federal Reserve System · 2026-Q1