Loan Origination Fees
A loan origination fee covers administrative, underwriting, and document costs. Expressed in "points" (1 point = 1% of loan). Separate from discount points, third-party fees, and prepaids. APR incorporates origination fee for true cost comparison. Break-even analysis determines whether paying more upfront for a lower rate is beneficial.
Structure
- Points: 1 point = 1% of loan amount
- Or flat fee (fixed dollar amount)
- Covers processing, underwriting, documents
Cost Impact
- Increases total cost of borrowing
- APR provides true cost comparison
- Short hold = higher effective cost
Break-Even Analysis
- Higher fee for lower rate: calculate savings
- Monthly savings / upfront cost = break-even
- Plan to hold longer than break-even: pay points
Related Terms
- Origination Charge — Lender fee
Barnes Walker Real Estate
Barnes Walker’s attorneys review loan terms for Florida borrowers. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC