Let's assume that you have just taken out a mortgage loan for $200,000 with an origination fee of 0.2 points due up-front. The mortgage term is 30 years and the mortgage rate is fixed at 4%. What is the cost of the origination fee in dollar terms?

The cost of the origination fee is $200 in dollar terms.

Explanation:

1 point is 1% which translates to 1/100,hence 0.2 point is the same 0.2/100

The cost of the original fee in dollar terms is calculated thus:

0.2/100*$200000=$400

As a result, the origination fee is $200 in dollar terms

Origination fee or processing fee is an upfront fee charged by a lender in a bid to recover loan processing administration costs from borrowers.

The points charged as origination fee differs from one lender to another,it would make sense to say that the higher the mortgage amount or loan the lower the origination fee in percentage terms.

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