how to pay loan origination fees
origination fees may represent just a small part of the closing costs and fees that must be paid when entering into a loan specific to a mortgage there may be a variety of ways to pay this small cost note that the ways to cover the origination fees below are not exhausted or listed in any particular order loan origination fees vs pointsdiscount points and loan origination fees are two prepaid finance charges associated with mortgages or home loans they represent different aspects of the loan process borrowers may come across both as part of their purchase and financing documents points are upfront fees paid to the lender at the time of closing the mortgage expressed as a percentage of the total loan amount there are two types of points discount points and origination points discount points are optional fees borrowers can pay to reduce the interest rate on the loan origination points are fees charged by the lender for processing the loan application and creating the loan essentially compensating it for its services loan origination fees are different they are specific charges imposed by the lender for processing the loan application and facilitating the mortgage process loan origination fees may be a flat fee usually expressed in dollars rather than a percentage of the loan amount these fees are meant to cover administrative costs paperwork and other services involved in evaluating the borrower s creditworthiness example of origination feelarry is purchasing his first home and has secured a mortgage through a local bank the loan amount is 250 000 and the lender charges a loan origination fee of 1 5 of the loan amount this means the origination fee would be 1 5 of 250 000 which equals 3 750 even though we discussed many more options above let s assume larry has only two options in this example assuming larry opted for a 30 year fixed rate mortgage with an interest rate of 4 larry s monthly payment for a 250 000 loan over 30 years is approximately 1 193 however with the increased loan amount of 253 750 the new monthly payment would be approximately 1 208 by rolling the 3 750 loan origination fee into the mortgage larry s monthly payment increases by 15 while this may not seem like a significant increase it s essential to consider the long term impact as he will be paying this additional amount over the entire loan term 360 months 