An unused fee charges 25 to 50 basis points annually on the undrawn portion of the construction commitment. It compensates the lender for reserving capital that is not yet earning the loan spread . The fee accrues quarterly and is usually paid in arrears.
Why do banks charge it?
Construction commitments tie up regulatory capital from day one even though only a fraction is drawn. The unused fee restores some of the spread the lender would have earned on the full commitment, and incentivizes the borrower to draw promptly rather than parking the commitment.
Can it be negotiated?
Sometimes the fee can be reduced for relationship borrowers or eliminated for the first 6 to 12 months of the build (when draws ramp slowly). Some lenders waive it on heavy-amenity projects with predictable draw schedules. Always quantify it in pro forma, on a $50 million commitment a 50-basis-point unused fee is meaningful.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Quarterly Banking Profile · Federal Deposit Insurance Corporation · 2026-Q1