Points and Origination Fees: What You Actually Pay

A point is 1% of the loan amount, paid at closing. Two points on a $500,000 loan is $10,000. That is the whole definition, and it is the number most borrowers underweight when they compare two quotes on rate alone.

Points versus rate

Points and rate trade against each other. A lender can quote you a lower rate and take more of the return up front, or quote a higher rate and take less. Neither is a trick. On a short hold they are very different bills.

On a 6-month flip, a point costs you the same whether you exit in month 3 or month 6, but the rate only runs while the loan is outstanding. Pay for a lower rate on a deal you plan to exit early and you are buying something you will not use. Our fix and flip term is 6 months, so that math comes up on nearly every file.

What origination actually covers

Origination is the lender's fee for underwriting and closing the loan. On investor loans it is usually expressed in points and sits in the same line as them. It pays for the work of reading your deal, ordering what needs ordering, and funding.

The fees that are not the lender's

• Appraisal or valuation — paid to a third party, not the lender.
• Title and escrow — see title and insurance on an investor loan.
• Recording and transfer — set by the county, identical whoever funds you.
• Inspection or draw fees — on a build, per draw. See draw inspections.

Ask which line items are the lender's and which are pass-through. The pass-throughs are broadly the same everywhere. The lender's own lines are where quotes actually differ.

How to compare two quotes properly

Add the points, the origination, and the interest you will actually pay over your real hold period. Then compare that one number. Our hard money cost calculator does it for you, and what a 6-month flip loan costs walks a full example.

For the rate side of the same question, hard money loan rates and costs covers what drives the rate itself.

What is negotiable

Points move on deal quality: experience, leverage, and how clean the exit is. A borrower on their eighth flip with 65% LTV has room a first-timer at 90% does not. Third-party costs do not move, because they are not ours to move.

Terms are subject to underwriting, and this is not a commitment to lend.