Definition
Origination Fee
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Origination fee, or sometimes called a processing fee, is an upfront fee charged by the bank as a percentage of the loan amount.
It is an upfront fee because it usually directly deducted from the loan amount at disbursement.
Loan origination describes the whole process of borrowing from the point where the borrower submits the application forms to the stage where the funds are finally disbursed.
Meaning this fee is for the payment of the services rendered to realize the loan.
Do note that this is different than expense items that are quoted in dollars.
While fixed dollar cost items might also be deducted from the loan amount before disbursement, they are not to be confused with origination fees which are expressed as percentage of loan quantum.
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