Paying off a property in 3 years?

[Isaiah Cuellar]

Good morning everyone, I was wondering, if I want a property paid off in three years, and I put 20% down, should I put as much as I can monthly (I can add an extra $4,000 per month) or, should I put the $4,000 each month into a 5.8% interest rate CD, and wait until I have enough to pay off the principal cash? Common sense tells me put the money in CD’s to build more and let the tenant pay off the mortgage until I can pay it cash, but a lender told me the best way would be to put the $4,000 per month straight into the principal… was that just him trying to make more off of interest from me? 

[Tanner Lewis]

Quote from @Isaiah Cuellar:

Quote from @Tanner Lewis:

It depends if your loan has a prepayment penalty. Most DSCR loans will carry a 5-year penalty, so I suggest waiting until that is over before paying more than your minimum payment , or you will incur additional fees.

What is a DSCR loan? Is that a conventional for an investment property? And the 5 year penalty will be in the contracts I sign right?

Hey Isaiah, DSCR Loans are thirty-year mortgages secured by turnkey residential real estate properties strictly used for business purposes and underwritten primarily based on the property. They are typically what investors use for rental properties once they are no longer eligible for conventional financing. Investors also use them if they want to borrow within an LLC or buy personal residences down the road. Most of them carry five-year prepayment penalties to buy the rate down without charging additional points at closing, but it really just depends on how your loan officer structures the loan for your goals. In your case, if your goal is to pay it off all cash in a few years, I would structure your loan with no prepayment penalty and just eat the increased interest rate for a few years, but it really just boils down to what makes sense for your goals and if the numbers support it.