Origination fee

An origination fee or establishment fee is a payment charged for establishing a loan account with a bank, broker, or other financial service provider.[1][2][3]

While origination fees can be a set amount, a tiered amount, or a percentage. Percentages typically range from 1.0% to 5.0% of the loan amount, varying based on whether the loan is in the prime or subprime market. For example, an origination fee of 5% on a $10,000 loan is $500.[2][4] In the United States, Discount points are used to buy down the interest rates, temporarily or permanently. Origination fees and discount points are both items listed under lender-charges on the HUD-1 Settlement Statement. Regulation Z was enacted to protect borrowers from abusive lending practices. Under this regulation, origination fees for mortgages cannot be deducted from taxes.[5]

See also

Notes

  1. ^ "Origination Fee". investopedia. Retrieved 21 May 2013.
  2. ^ a b "loan origination fee". investorwords. Retrieved 21 May 2013.
  3. ^ "What is an establishment fee?". Plenti. Retrieved January 17, 2024.
  4. ^ "Included fees guide". Tuesday, 18 June 2019
  5. ^ "Loan Origination Fees: What They Are And How You Can Save". personaldebtrelief. Archived from the original on 29 October 2013. Retrieved 1 January 2014.


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