Glossary
Line fee
Also called: facility fee, commitment fee
A line fee is a charge on the total limit of a facility, rather than on the amount drawn. It is common in construction and revolving facilities, where the lender commits to funds that the borrower may draw over time.
An example
A developer's construction facility charges interest on the drawn balance and a line fee on the full limit. In the early months, when little has been drawn, the line fee is a noticeable part of the monthly cost.
Why it matters
Line fees mean an unused facility still costs money. When comparing offers, include the line fee over the full term along with interest and other fees to see the overall cost.
Points to check
Ask whether the line fee is charged on the full facility limit from the first day or only once drawdowns start. Check how often it is charged and whether it is capitalised. Because the fee applies to undrawn amounts, a larger limit than you need increases the cost. Include the line fee in your total cost comparison, alongside interest on the drawn balance and other fees.
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