Dscr Loans And Prepayment Penalty

[Megha Mathur]

Hello all, 

We are looking to use the DSCR loans for buying our investment property. We were told about the prepayment penalty...now I do have a general understanding of what the prepayment penalty is...are there any lenders that offer these types of loans without the penalty? What kind of terms would I be looking at, let's say for a $350K property? We are looking in Texas.

Would appreciate any and all help in helping me get a clearer picture on this...thank you! 

[Stuart Udis]

It's common to see pre-payment penalties in this loan product and now lenders are less inclined to negotiate these pre-payment penalties down knowing rates are expected to continue to decrease which incentivizes the borrower to refinance. At this time, you might come out ahead using a hard money lender who does not charge a pre-payment penalty. When looking at the whole picture, you may pay higher finance charges for the next year or two but could theoretically still come out ahead if there's no pre-payment penalty. Also, some lenders I work with do not charge the pre-payment penalty if you refinance with them, or it is reduced significantly. That is something to ask your lender.