Calculate the total origination fee and the net loan amount.
$0.00
Total Origination Cost
Net Loan Amount:
Understanding Loan Origination Fees
When you apply for a loan, whether it's a mortgage, a personal loan, or a business loan, lenders often charge various fees to cover their administrative and processing costs. One of the most common fees is the Loan Origination Fee. This fee is essentially the lender's charge for processing your loan application, evaluating your creditworthiness, and preparing the loan documents.
What is an Origination Fee?
The origination fee is a one-time charge paid at the closing of a loan. It's typically expressed as a percentage of the total loan amount, but it can also include fixed fees for specific services like processing or underwriting. Lenders use these fees to cover the costs associated with originating the loan, such as:
Evaluating your credit report and score.
Appraising property (for mortgages).
Verifying your income and employment.
Preparing loan documents.
Underwriting the loan.
How is the Loan Origination Fee Calculated?
The calculation involves several components:
Percentage-Based Fee: This is the core of the origination fee. It's calculated by multiplying the total loan amount by the origination fee rate (expressed as a percentage).
Formula:Percentage Fee = Loan Amount * (Origination Fee Rate / 100)
Fixed Fees: Lenders may also add fixed charges for specific services, such as processing fees or underwriting fees. These are added directly to the percentage-based fee.
Formula:Total Fixed Fees = Processing Fee + Underwriting Fee + Other Fixed Fees
Total Origination Cost: The sum of the percentage-based fee and all fixed fees.
Formula:Total Origination Cost = Percentage Fee + Total Fixed Fees
Net Loan Amount: This is the amount of money you actually receive after the origination costs are deducted from the total loan amount.
Formula:Net Loan Amount = Loan Amount - Total Origination Cost
Example Calculation
Let's say you are applying for a mortgage with the following details:
Loan Amount: $250,000
Origination Fee Rate: 1.25%
Processing Fee: $600
Underwriting Fee: $800
Using our calculator or the formulas:
Percentage Fee = $250,000 * (1.25 / 100) = $3,125
Total Fixed Fees = $600 + $800 = $1,400
Total Origination Cost = $3,125 + $1,400 = $4,525
Net Loan Amount = $250,000 – $4,525 = $245,475
Why is it Important to Understand Origination Fees?
Origination fees can significantly impact the overall cost of your loan. By understanding these fees, you can:
Budget Effectively: Know exactly how much cash you'll need at closing.
Compare Lenders: Use origination fees as a factor when comparing offers from different lenders. A lower interest rate might be attractive, but higher origination fees could offset those savings.
Negotiate Terms: In some cases, you may be able to negotiate certain fees with the lender.
Always review your loan disclosure documents carefully to understand all the fees associated with your loan. Our calculator is a tool to help you quickly estimate these costs.
function calculateOriginationFee() {
var loanAmountInput = document.getElementById("loanAmount");
var originationFeeRateInput = document.getElementById("originationFeeRate");
var processingFeeInput = document.getElementById("processingFee");
var underwritingFeeInput = document.getElementById("underwritingFee");
var resultDiv = document.getElementById("result");
var netLoanAmountDiv = document.getElementById("netLoanAmount");
var netLoanValueSpan = document.getElementById("netLoanValue");
var loanAmount = parseFloat(loanAmountInput.value);
var originationFeeRate = parseFloat(originationFeeRateInput.value);
var processingFee = parseFloat(processingFeeInput.value);
var underwritingFee = parseFloat(underwritingFeeInput.value);
// Clear previous results and error messages
resultDiv.innerHTML = "$0.00 Total Origination Cost";
netLoanAmountDiv.style.display = 'none';
// Validate inputs
if (isNaN(loanAmount) || loanAmount <= 0) {
// Optionally display an error message to the user
return;
}
if (isNaN(originationFeeRate) || originationFeeRate < 0) {
originationFeeRate = 0; // Treat negative rate as 0
}
if (isNaN(processingFee) || processingFee < 0) {
processingFee = 0; // Treat negative fee as 0
}
if (isNaN(underwritingFee) || underwritingFee < 0) {
underwritingFee = 0; // Treat negative fee as 0
}
// Calculations
var percentageFee = loanAmount * (originationFeeRate / 100);
var totalFixedFees = processingFee + underwritingFee;
var totalOriginationCost = percentageFee + totalFixedFees;
var netLoanAmount = loanAmount – totalOriginationCost;
// Format currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
});
// Display results
resultDiv.innerHTML = formatter.format(totalOriginationCost) + " Total Origination Cost";
if (netLoanAmount >= 0) {
netLoanValueSpan.innerHTML = formatter.format(netLoanAmount);
netLoanAmountDiv.style.display = 'block';
} else {
// Handle cases where fees exceed loan amount, though unlikely with typical origination fees
netLoanValueSpan.innerHTML = "$0.00 (Fees exceed loan amount)";
netLoanAmountDiv.style.display = 'block';
}
}