The Disadvantage of DSCR Loans

DSCR loans typically have prepayment penalties ranging from 1 to 5 years.

This means if you were to sell, refinance or pay down a large portion of the loan during the prepayment penalty period, you could be subject to a penalty (usually a small % of the loan (ie. 1 to 3% of the balance)).

The catch is that usually the longer the prepayment penalty, the lower the interest rate

This means a loan with a 5 year prepayment penalty will typically have a lower interest rate than a loan with a 1 year prepayment penalty.

If you plan to hold the property long-term this may not be an issue, but if you think you may sell in 4 years you may want to consider a loan with a shorter prepayment penalty.

The Advantages of DSCR Loans

DSCR loans do NOT require any verification of your personal income or employment so whether you make $1,000,000 a year or don't have a job, it does not affect your ability to qualify for a DSCR loan.

Because DSCR loans are not "full doc" loans we are able to close them faster for you.

A property does NOT need to be rented before you qualify for a DSCR loan.

You can vest the property in your LLC (conventional loans do not allow this).

Most DSCR loans are 30 year fixed rate loans (just like conventional loans).

You can do a "no seasoning" DSCR cashout loan and use the new value of the property to qualify for the loan. This means if you purchased a property today and fixed it up, tomorrow you could do a DSCR cashout loan using the NEW appraised value. Conventional financing typically requires you to wait 12 months before you can do a cashout refinance using the new value.