origination fee
Definition
Noun: A fee charged by a lender to a borrower to cover the administrative costs associated with processing and initiating a new loan, especially a mortgage loan. It compensates the lender for the work involved in evaluating, underwriting, and setting up the loan.
Usage
The origination fee is typically expressed as a percentage of the total loan amount (e.g., 1%) or as a flat fee. It is a common upfront cost in many loan agreements. - The bank charged a 1% origination fee on the mortgage. - Be sure to ask about the origination fee when comparing loan offers from different lenders.
Advanced Usage
- Points: In mortgage lending, the origination fee is sometimes referred to as "discount points" or simply "points," where one point equals one percent of the loan amount. However, points are technically used to buy down the interest rate, while an origination fee is specifically for processing costs. They are often grouped together in loan estimates.
- Negotiability: In some cases, the origination fee may be negotiable, or a lender might offer a "no-origination-fee" loan, often in exchange for a higher interest rate.
Variants and Related Words
- Loan origination: (n) The process a lender follows to process a loan application, from submission to funding.
- Underwriting fee: (n) A fee specifically for the risk assessment and approval process, sometimes included within or separate from the origination fee.
- Processing fee: (n) A fee for the administrative work of handling the loan application; often a component of the total origination fee.
Synonyms
- Loan setup fee
- Administrative fee (for loan initiation)
Related Phrases
- To pay an origination fee: The standard phrase for incurring this cost.
- We had to pay a $2,000 origination fee at closing.
- Origination fee waived: A phrase indicating the lender is not charging this fee.
- The credit union is offering a special promotion where the origination fee is waived.
Noun
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a fee charged to a borrower (especially for a mortgage loan) to cover the costs of initiating the loan
