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Origination Fee
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The fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.
An origination fee is a payment associated with the establishment of a new loan. This fee is paid to the bank (or perhaps the Broker) that provides the loan or services associated with taking out a loan. The fee usually varies from 0.5% (half a point) to 2% (two points) of a given loan amount, depending whether the loan was originated in the prime or the sub prime market. For example, an origination fee of 2% on a $200,000 loan is $4,000.
Most banks and brokers charge an origination fee. Some loan structures also call for Discount points. Discount points differ from origination fees. Discount points are used to buy down the Interest rates, temporarily or permanently. In other words, in Exchange for paying a lump sum up front, the Interest rate Will be reduced.
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Privatebanking.com
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