How many points does one origination point represent in financial terms?

One origination point represents 1% of the contractual loan amount. This is a standard practice in real estate and mortgage lending, where points are used to express the costs associated with obtaining a loan.

When a lender charges one origination point, they are essentially charging a fee that is equal to 1% of the total amount borrowed. For example, if a borrower takes out a $200,000 loan, one origination point would equal $2,000. This fee can be paid upfront at closing or added to the loan amount, depending on the terms agreed upon between the borrower and lender.

Understanding origination points is crucial for borrowers as it affects the overall cost of the loan. These fees can sometimes be negotiable, and knowing how they contribute to the total cost can help in making informed financial decisions when choosing a loan product.