origination fee

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A lender’s charge to a borrower, especially for a mortgage loan to cover the costs of issuing the loan, such as the salesman’s commission. It may cover a credit check, appraisal, and title expenses. If the fee is a discount point and is only for the use of money, the fee is considered interest and may be deductible (for purchase of a home) or amortizable (for refinancing of a home).
See also points .

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This entry contains information applicable to United States law only.

A charge imposed by a lending institution or a bank for the service of processing a loan.

For example, a bank might charge an individual who has applied for a student loan an origination fee of one percent for processing the application and granting the loan.

An up-front fee charged by a lender for processing a new loan application, used as compensation for putting the loan in place. Origination fees are quoted as a percentage of the total loan and are generally between 0.5% and 1% on mortgage loans in the United States.

Investopedia Says:
An origination fee is similar to any commission-based payment. If a lender takes a 1% fee for originating a loan, they will make $1,000 on a $100,000 loan, or $2,000 on a $200,000 loan. It is likely that the fee rate would be negotiated lower for bigger loans in order to obtain the valuable business.

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For a list of words related to origination fee, see:

• Mortgages and Financing - origination fee: points charged on face value of mortgage at time of purchase

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