How do you calculate a loan origination fee?
Origination fee = loan amount × the lender's percentage, typically 0.5–1%. On a $320,000 loan that's $1,600–$3,200. It's separate from discount points, which are optional prepaid interest (1 point = 1% of the loan) used to buy a lower rate.
Origination vs discount points on a $320,000 loan
| Charge | Cost | What you get |
|---|---|---|
| 1% origination | $3,200 | Lender's processing/underwriting profit |
| 0.5% origination | $1,600 | Same service, cheaper lender |
| 1 discount point | $3,200 | ≈ 0.25% lower rate (varies daily) |
| Break-even on 1 point | ≈ 6 years | $3,200 ÷ ~$45/mo saved |
How to read this table
- 1% origination sits at the top of the table ($3,200) — lender's processing/underwriting profit. If your situation looks like this row, plan against the upper half of the range rather than the midpoint.
- Break-even on 1 point anchors the bottom (≈ 6 years) — $3,200 ÷ ~$45/mo saved. Treat this as the conservative case you should still be profitable at.
- The gap between the top and bottom row is roughly 533×. That spread is why a single blended average is close to useless here — pick the row that matches your setup instead of averaging the column.
- With 4 reference points in the "origination vs discount points on a $320,000 loan" table, the fastest way to use this page is to find the closest row, take its cost, then stress-test it ±30% before you build a plan on it.
Context
Origination is the most negotiable line on the Loan Estimate — get two Loan Estimates on the same day (rates move intraday) and compare Section A. Watch for double-charging: an 'origination fee' plus separate 'processing' and 'underwriting' fees is the same cost in three coats. Points only make sense if you'll keep the loan past break-even; with the average mortgage lasting under 7 years, one point is usually the ceiling worth considering.
What moves this number
Financing terms
Rate, down payment and amortisation drive cash-on-cash return more than purchase price does. The same building can cash-flow or bleed depending on the loan.
True operating expense ratio
Management, insurance, tax, maintenance, vacancy and capital reserve typically consume 35–50% of gross rent. Models that skip reserves overstate returns badly.
Vacancy and turnover
One 45-day vacancy plus a turn can erase a year of thin cash flow. Underwrite 5–8% vacancy even in tight markets.
Local regulation
Rent rules, short-term rental caps and licensing requirements change the achievable revenue of an identical property between neighbouring cities.
Methodology
Fee ranges from 2025–2026 lender rate sheets; point break-even uses the payment difference on a 30-year fixed at ~6.5% vs ~6.25%.
Assumptions and caveats
- Returns exclude appreciation and principal paydown unless a row states otherwise.
- Local tax, insurance and regulation can move these figures by several points in either direction.
- This page was last reviewed on 2026-10-01. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
- Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.
Frequently asked questions
How do you calculate a loan origination fee?
Origination fee = loan amount × the lender's percentage, typically 0.5–1%. On a $320,000 loan that's $1,600–$3,200. It's separate from discount points, which are optional prepaid interest (1 point = 1% of the loan) used to buy a lower rate.
Which option pays the most in the origination vs discount points on a $320,000 loan table?
1% origination, at $3,200 (Lender's processing/underwriting profit). That row represents the strongest case in this dataset, so use it as an upper bound rather than an expectation.
What is a realistic low-end figure?
Break-even on 1 point at ≈ 6 years ($3,200 ÷ ~$45/mo saved). Plan your costs so the low end still works, then treat anything above it as upside.
Why do the numbers vary so much?
The spread between the highest and lowest row is about 533×. Financing terms and true operating expense ratio explain most of that gap — see the drivers section above for the full list.
Where do these numbers come from?
Fee ranges from 2025–2026 lender rate sheets; point break-even uses the payment difference on a 30-year fixed at ~6.5% vs ~6.25%.
How can I estimate my own number instead of using a benchmark?
Use the Closing Costs Calculator on RevenueLab — it takes your own inputs and returns a figure specific to your setup, which is always more accurate than a published range.
Model your own numbers
Related reading
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Last updated 2026-10-01.