Origination Fee
The lender's charge for processing and funding a loan, usually expressed as origination points (a percentage of the loan). It's the core upfront cost of getting an investor loan closed.
An origination fee is what a lender charges to create, process, and fund a loan. On investor loans it's almost always quoted as origination points — a percentage of the loan amount — so a 2% origination fee on a $200,000 loan is $4,000, due at closing.
This is the lender's primary compensation for underwriting the deal, and on short-term hard money and fix-and-flip loans it's a major piece of the total cost, often as significant as the interest itself.
Origination fee vs. points vs. other fees
The terms overlap, so it helps to separate them:
- Origination fee / origination points — the lender's charge to make the loan (its profit + processing). Typically 1–3 points on investor bridge/hard money, often lower on DSCR.
- Discount points — optional points you pay to buy down your rate (see points).
- Junk/admin fees — flat fees for underwriting, processing, document prep, wire, etc. (often a few hundred to ~$1,500 total).
The origination fee is the big, percentage-based one; the rest are smaller flat charges.
A worked example
| Cost | Amount |
|---|---|
| Loan amount | $200,000 |
| Origination fee (2 pts) | $4,000 |
| Underwriting fee | $995 |
| Doc prep | $400 |
| Wire fee | $50 |
| Total lender charges | ~$5,445 |
These are usually deducted from loan proceeds (reducing your net funding) or paid in cash at closing.
How it fits into your real cost
The origination fee is a one-time, upfront cost — so its impact depends heavily on your hold period. On a 6-month flip, 2 points is a large slice of total financing cost. On a 30-year DSCR hold, the same points spread across years and matter far less. Always compare lenders on total cost over your expected hold — origination fee + interest + other fees — not on the rate or the points alone. A lower rate paired with steep origination can easily cost more than a higher rate with light fees on a short hold.
Frequently asked questions
How much is a typical origination fee on a hard money loan?
Usually 1–3 points (1–3% of the loan amount). On a $200,000 loan that's $2,000–$6,000. The exact figure depends on loan size, leverage, your experience, and the lender — larger loans and experienced borrowers generally negotiate lower origination fees.
Is the origination fee the same as discount points?
No. The origination fee (origination points) is the lender's charge to make the loan. Discount points are optional and paid to buy down your interest rate. Both are quoted in points, but one is the cost of getting the loan and the other is a rate-reduction purchase.
Can the origination fee be rolled into the loan?
Often it's deducted from your loan proceeds rather than paid out of pocket, which reduces your net funding at closing. Some lenders require it in cash. Either way it's part of your true cost, so weigh it against the rate over your expected hold period.