DSCR Loan 8.62%

[Vishal Amin]

Hi BR Community,

I just closed on a duplex property using a DSCR loan with a 8.625% in Cleveland, OH. I know this is something I should have asked earlier, what kind of rates are you guys getting in your local market or if you are investing in Cleveland.

The lender has also a put a 5 year prepayment premium on the loan, which I have a hard time understanding. Does this mean, I am not able to refinance to a lower rate in the future until 5 years or I would have to pay a penalty if I were to do it earlier than 5 years.

Thank You,

[Robin Simon]

This is not a great rate, but its in range and could be solid depending on your credit, leverage, etc. Its going to be more about those factors than any local market factors for DSCR Lenders.

The lender should have gone over the prepayment provisions more closely before closing, but assuming you likely have whats called a "stepdown" prepayment penalty shorthand called "5/4/3/2/1" - this means that you can refinance and prepay, however if done in the first year of term you will have to pay a 5% fee, second year 4%, third year 3% etc.  After five years, no fees associated with refinancing or prepaying.  Not prohibitive like a "lockout period" you may see with commercial or traditional multifamily loans, just a small fee

More info on factors that go into DCSR rates and Prepayments:

DSCR Loans: What Are They And How To Get The Best Terms

https://www.biggerpockets.com/...

DSCR Loans: How To Use Pro Strategies To Save More And Make More

https://www.biggerpockets.com/...