Loan Origination Fee Calculator Formula

Understand the math behind the loan origination fee calculator. Each variable explained with a worked example.

Use the Loan Origination Fee Calculator

Formulas Used

Total Origination Fee

total_fee = total_origination

Percentage-Based Fee

percentage_fee = pct_fee

Total Fee as % of Loan

fee_as_pct_of_loan = total_origination / loan_amount * 100

Monthly Mortgage Payment

monthly_pmt = monthly_payment

Fee Spread Over Loan Life (per month)

fee_in_monthly_terms = total_origination / n

Variables

VariableDescriptionDefault
loan_amountLoan Amount(USD)350000
origination_pctOrigination Fee Percentage(%)1
flat_feeAdditional Flat Processing Fee(USD)500
interest_rateLoan Interest Rate(%)7
loan_term_yearsLoan Term(years)30
pct_feeDerived value= loan_amount * origination_pct / 100calculated
total_originationDerived value= pct_fee + flat_feecalculated
rDerived value= interest_rate / 100 / 12calculated
nDerived value= loan_term_years * 12calculated
monthly_paymentDerived value= r > 0 ? loan_amount * r * pow(1 + r, n) / (pow(1 + r, n) - 1) : loan_amount / ncalculated

How It Works

Loan Origination Fees

The origination fee compensates the lender for evaluating, processing, and approving your mortgage application.

Components

  • Percentage fee: Typically 0.5% to 1.5% of the loan amount
  • Flat processing fees: Additional administrative charges ($300-$900)

    • Negotiation Tips

  • Origination fees are negotiable; always ask for a reduction
  • Compare the total fee across multiple lenders, not just the percentage
  • A lower origination fee may come with a higher interest rate (and vice versa)
  • Some lenders advertise no origination fee but build the cost into the rate

    • Tax Treatment

    Origination fees (points) paid on a purchase loan are generally tax deductible in the year paid. On a refinance, they are deducted over the loan life.

    Worked Example

    A $350,000 loan with 1% origination fee plus a $500 flat processing fee.

    loan_amount = 350000origination_pct = 1flat_fee = 500interest_rate = 7loan_term_years = 30
    1. 01Percentage-based fee: $350,000 x 1% = $3,500
    2. 02Flat processing fee: $500
    3. 03Total origination fee: $3,500 + $500 = $4,000
    4. 04Fee as % of loan: $4,000 / $350,000 = 1.14%
    5. 05Monthly mortgage payment: $2,328.56
    6. 06Fee spread over 360 months: $4,000 / 360 = $11.11/month equivalent

    Ready to run the numbers?

    Open Loan Origination Fee Calculator