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Simply put, an origination fee is a fee that lenders charge when entering a loan agreement to help recoup the costs of originating the loan (which can sometimes be upwards of $9,000). Typically, origination fees are a percentage of the total loan. For instance, at Visio Lending, our standard origination fee is 2% of the total loan. That means that on a $280,000 loan, the standard origination fee would be $5,600. However, on the same loan, Visio borrowers have the options to pay as high as 5 points and as low as no points. Let’s dive into this optionality and when each option would be best for your investment strategy.
With these options, borrowers will pay an extra 60 or 30 basis points on the interest rate, yet no origination fee or only 1 % upfront. Borrowers looking to sell their rental properties in the near future, the rental properties we’ve coined “transitional rentals,” are interested in these point options because they are interested in the immediate costs of the loan, rather than the lifetime of the loan.
Pair with: Our 5/1 ARM, 5 Year Interest Only, or 7/1 ARM Rate Structure
This is the middle ground option. If the borrower feels their rate is decent and they have the out-of-pocket money to pay 2%, they might just stay with the standard fee. Ultimately, it is all about the math of the borrow's specific loan scenario.
Pair with: Any of our rate structures!
With these options, borrowers can pay more money upfront to take 30, 60 or 90 basis points off their interest rates. Borrowers looking to hold onto their rental properties long term, what we’ve coined “permanent rentals,” are more interested in the lifetime cost of the loan and the options that will save them money in the long-term.
Pair with: Our 30-Yr Fixed Rate Structure