An origination fee, or activation fee, is a payment associated with the establishment of an account with a bank, broker or other company providing services handling the processing associated with taking out a loan.
An activation fee is typically a set amount for any account. However, an origination fee usually varies from 0.5% (half a point) to 2% (two points) of a given loan amount, depending on whether the loan was originated in the prime or the subprime market. For example, an origination fee of 2% on a $200,000 loan is $4,000.
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.
Famous quotes containing the word fee:
“As a general rule never take your whole fee in advance, nor any more than a small retainer. When fully paid beforehand, you are more than a common mortal if you can feel the same interest in the case, as if something was still in prospect for you, as well as for your client.”
—Abraham Lincoln (1809–1865)