A lender is considering what terms to allow on a loan. Current market terms include 8% interest for 25 years for a fully amortizing loan. The lender anticipates market rates to move upward very soon, possibily before the loan is closed and the borrower has a less than perfect credit record. The lender decides to offer the borrower a constant payment mortgage (our typical loan) for $95,000 at 9% for 25 years; however, the lender wants to charge a loan origination fee (points) to make the mortgage loan yield 10%.

What origination fee should the lender charge?

What fee should be charged if the loan will be repaid in 10 years?