No Mortgage Origination Fees? Here’s the Catch | Town & Country Credit Union

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No Mortgage Origination Fees? Here’s the Catch

No Origination Fee? What's the Catch?By Lisa Thuner, Executive Mortgage Officer

What is an origination fee? A mortgage loan origination fee generally covers the costs of preparing loan documents, underwriting the loan and processing the application. Typically, the origination fee will be about 1 percent of the total loan amount.

Lower or no origination fees = higher interest rates

You may have seen “no origination fee” advertised by mortgage lenders. No fee sounds awesome, right? However, it’s not quite that simple.

While it is possible to negotiate a lower origination fee or avoid one altogether, the catch is that the most common way to do so is to agree to a higher interest rate in return. Depending on how long you plan to live in your home, this may not be the best option for you. The longer you live in your home and hang on to your mortgage, the more it will benefit you to pay the origination fee and take the lower interest rate.  If you plan to only live in the home for 2-3 years, then it might make financial sense to take a slightly higher rate and to not pay the origination fee upfront. 

Want some help figuring out which option is best? Our experienced loan officers can meet with you to determine the best path for you that will save you money in the long run. Buying a home is one of your biggest life decisions. You should be educated on what is right for you. Request a free consultation here or find a mortgage officer near you today by clicking the button below.