Origination points
Origination points are an upfront fee a lender charges the borrower at closing, stated as a percentage of the loan amount. One point equals 1% of the loan, so 2 points on $500,000 is $10,000.
How origination points work
Points are agreed in the term sheet and collected from the borrower at closing, usually deducted from the loan proceeds or paid in the settlement statement. Business-purpose bridge, fix-and-flip and construction loans commonly carry points, and the amount depends on the loan, the borrower and the market. The Office of the Comptroller of the Currency’s mortgage banking handbook shows how points and rate trade off in loan pricing: a lender can price a loan at the market by charging a point, or at a premium by charging more.
Why it matters to a private lender
Points are often the lender’s main upfront income on a loan, and they are earned at closing whether the loan is held, sold or placed with a capital partner. How you split your pricing between points and rate affects both your upfront cash and your ongoing yield spread.
With Lender Capital, you keep your origination points less the placement fee. The fee is paid at closing from the points, and only when a loan funds.
Example
Hypothetical. A $500,000 bridge loan with 2 points produces $10,000 at closing. Lender Capital’s published placement fee for a standard lender is 1.00% of the loan amount up to $3,000,000, here $5,000, so the lender keeps $5,000 of the points. If the note rate is 12% and the capital partner’s rate is 10%, the lender also earns a 2% yield spread, about $10,000 a year, while the loan is outstanding.
Model points and spread together in the lender spread calculator.
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.