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 1% of the total loan. That means that on a $280,000 loan, the standard origination fee would be $2,800. However, on the same loan, Visio borrowers have the options to pay as high as 4 points. Let’s dive into this optionality and when each option would be best for your investment strategy.
No Points
This option eliminates an origination fee, yet increases your rate. Borrowers looking to sell their rental properties in the near future, the rental properties we’ve coined “transitional rentals,” are interested in paying no points because they are more concerned with the immediate costs of the loan, rather than the lifetime of the loan.
Pair with: Our 5/1 ARM or 7/1 ARM Rate Structure
1 Point
1% is our standard fee. Transitional rental investors often keep the standard point option because they can still pay one point while keeping their upfront costs down. Investors looking to hold onto the property long term will often keep the standard origination fee if they are happy with their interest rate.
Pair with: Any of our rate structures
2-4 Points
With these options, borrowers can pay more money upfront to take 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
Want to learn more about our Loan Programs and borrower strategies? Check out our blog section "The Visio Box" or refer to our FAQ Page or Want to price out your loan scenario? Contact us.
Editor's Note: This post was originally published in March 2019 and has been updated in March 2021 for freshness and accuracy.
Related: 3 Ways to Customize Your Visio Loan, 3 Visio Investor Strategies
