Origination fees can vary and depend heavily on the amount of money you have available to spend at closing. Most lenders have processing. Origination points are loan fees, but discount points are points that you pay to reduce your interest rate. 1  Origination fees compensate your lender for closing your loan. Unlike the 1 percent origination fee, however, veterans may finance the one-time funding fee by adding it into their VA home loan, or choose to pay it in cash at loan closing. But a loan origination fee does not directly lower your rate, unlike a discount fee. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT'S WEBSITE AT, Debt: A Common Reason for Mortgage Denial, Great Housing Migration; Credit Repair More Necessary Than Ever, Length of time you will own the property and keeping your current mortgage. The term "point" is slang for 1% of the loan amount; 1 point = 1%. Because a mortgage company needs to change a certain minimum to process a loan, an interest rate that covers this minimum would be considered at “par” and therefore have no origination fees or points. Like discount points, the cost of a single mortgage point is 1% of the mortgage loan. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. Points. Each point is equivalent to 1 percent of your total loan amount. Most mortgage lenders charge an origination fee, which is usually around 1% of the total cost of the loan. Origination Charge $3525.70 Line 802. Discount Points. You may also see it labeled as a point. Keep in mind though that this could very likely affect your interest rate. This category only includes cookies that ensures basic functionalities and security features of the website. The VA Funding Fee ranges from 1.5 to 3 percent of the loan. Origination points though are used to compensate loan officers and aren’t as common and are up for negotiation. If you take out a $200,000 loan and you pay two points, your fee will be $4,000. For example, if you have a $200,000 mortgage, each point is worth $2,000. It is a cost regardless of the rest of the terms. As such, if a mortgage company is charging 2 origination points on a 200,000 loan, you can expect to pay $4,000 in loan origination fees. It is a compensation to the financial institution for processing and approving your mortgage. Therefore, the longer you keep your mortgage and interest rate, the better idea it is to buy down your interest rate. "Also points are considered interest and are tax deductible, the same as any other mortgage interest" This is probably the crux difference. Origination Fee Vs Points. Origination fee: Underwriting, processing document preparation and funding fees may all be lumped into one charge called an origination fee. We've created informative articles that you can come back to again and again when you have questions or want to learn more! Discount points are fees you can pay to lower your interest rate to thus lower your monthly mortgage payment. Each point equals 1% of your loan amount. Origination Fee vs. Discount Points. As such, if a mortgage company is charging 2 origination points on a 200,000 loan, you can expect to pay $4,000 in loan origination fees. Sometimes called “origination points” this a fee you will pay to the person arranging your new loan. Origination fees can also include point purchases (money you pay towards getting a lower interest rate). An origination fee is what the lender charges the borrower for making the mortgage loan. Origination points are a fee that is added to your loan amount by the lender. Origination points, on the other hand, are lender fees that are charged for closing on a loan. An “origination” fee is the money you pay for the lender’s services. This website uses cookies to improve your experience while you navigate through the website. Generally you are pretty much paying the interest upfront. We can provide mortgage services for any properties located in California, Texas, and Arizona. See Today’s FHA Mortgage Rates in California, https://www.jvmlending.com/wp-content/uploads/JVM Lending logo.svg, The Difference Between Discount Points & Origination Fees. With a personal loan, some lenders allow borrowers to pay the origination fee upfront, or it may be taken directly from your loan proceeds. A discount point is an upfront payment that lowers your interest rate. It can take several years to break even on the initial investment. Points are one type of fee paid at closing by you to your mortgage lender. Loan origination fees or points cover the mortgage company’s costs in processing the loans. What is the difference between Origination Points and Discount Points? They are basically a way to pay for closing costs. Adding to the confusion, the term “points” also gets used informally to refer to a percentage of the loan amount.