13 Nov 2021

Term sheet

A term sheet is a sheet given by a lender to a potential home buyer which states the conditions in which they are willing to lend money. This term sheet is not a binding agreement between both parties and does not mean that the lender will financially provide the funds. Term sheets are often given to home buyers early on in the process of searching for a home loan and a house. 

Homebuyers are not obligated to only look or apply for one lender company or bank and can acquire as many term sheets as they like. It is recommended for comparison to look for the best mortgage interest rates.

Term sheets often include information like:

  • The Borrowers Full Name
  • The Purpose of Lending Money
  • The Closing Date
  • The Mortgage Interest Rate
  • The Term 

While the sheet includes the information above, it does not guarantee finance. Although this is the case, term sheets do allow for negotiations between a home buyer and a lender. The borrower can negotiate for a larger loan or a lower mortgage interest rate by providing additional information like their credit score and recommendation letters from landlords. Borrowers typically have the upper hand when it comes to negotiations because term sheets are non-binding, and lenders want to collect new clients. 

This is also why borrowers need to search for more than one lender. Bringing term sheets to lenders can help in negotiations if they compare interest rates and loan terms. Lenders do not want to lose clients to their competition and may change the term sheet to include the negotiations presented by the borrower. 

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