Hoping to get a survey of DSCR Loan Rates

[Carlo D.]

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

[Brandon Croucier]

Hi Carlo,

As mentioned DSCR loans vary widely based off of numerous factors, credit, LTV, Prepay type, DSCR Ratio, just to name a few.

However, I am seeing rates as low as 6.625% now on DSCR products in a perfect scenario.

In scenarios with low credit scores, high LTV's and short prepays we can easily be in the 9's.

When looking for a DSCR loan to fit your needs, I recommend getting in touch with someone who knows what they are doing to pencil the loan in your best interest.

Glad to connect and get into more detail!

[Carlo D.]

Quote from @Brandon Croucier:

Hi Carlo,

As mentioned DSCR loans vary widely based off of numerous factors, credit, LTV, Prepay type, DSCR Ratio, just to name a few.

However, I am seeing rates as low as 6.625% now on DSCR products in a perfect scenario.

In scenarios with low credit scores, high LTV's and short prepays we can easily be in the 9's.

When looking for a DSCR loan to fit your needs, I recommend getting in touch with someone who knows what they are doing to pencil the loan in your best interest.

Glad to connect and get into more detail!

 Thank you @Brandon Croucier I appreciate you being able to give me a general idea and the range of the rates these days. 

[Erik Estrada]

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

 Hey Carlo, 

It will depend on the LTV, FICO, PPP, and transaction type. With some heavy buydowns you can get the rate In the low 6s on these loans. But on average you will find rates anywhere from the low 7s to high 9s

[Carlo D.]

Quote from @Erik Estrada:

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

 Hey Carlo, 

It will depend on the LTV, FICO, PPP, and transaction type. With some heavy buydowns you can get the rate In the low 6s on these loans. But on average you will find rates anywhere from the low 7s to high 9s

 Thank you @Erik Estrada

[Robin Simon]

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

I can share that for July so far through 62 Loans funded, we have an average DSCR interest rate of 7.716% with a range from 6.875% to 9.000%. However, generally there is about a month or two lag with DSCR Loans between what is being quoted today and what is funding today due to deal cycle, and while there has been a ton of volatility recently, newer quoted rates are dropping and I'd expect our average to be a bit lower by the time July is through and for August - probably in the low sevens range

[Carlo D.]

Quote from @Robin Simon:

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

I can share that for July so far through 62 Loans funded, we have an average DSCR interest rate of 7.716% with a range from 6.875% to 9.000%. However, generally there is about a month or two lag with DSCR Loans between what is being quoted today and what is funding today due to deal cycle, and while there has been a ton of volatility recently, newer quoted rates are dropping and I'd expect our average to be a bit lower by the time July is through and for August - probably in the low sevens range

 AWESOME! Thank you @Robin Simon

[Jeff Chisum]

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

It may be more helpful to throw out a scenario like:

Purchase Price:  500K

20% down

740 credit score

6 months reserves 

1:1 ratio

Quote with and without a prepayment penalty and how long the prepayment penalty is.

[Jay Hurst]

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

 @Carlo D. Rates are only one piece of ANY loan, but especially with DSCR loans. You will hear and read on BP that the rates are the same as conventional but that is NOT really true. It is not really true because to get the same rate it will cost much more in upfront costs in either origination or discount fees, AND much higher back end fees in pre-payment penalties. Some DSCR loans have up to 5 year pre-payment penalties. That kind of a PPP can be hugely expensive if rates drop on the next few years.

Lets play that out and assume a 400k loan at 7% for argument sake. That would be a payment of 2661. Now, lets say rates drop to 5% in 18 months. If you refinanced the same 400k with no PPP at 5% that would be a payment of 2147, or a savings of 514 a month. BUT, if you  are 18 months into a 5 year PPP that would cost you 4% of 400k or 16,000 dollars to refi. So, you likely do not do it. It does not take too many months of missing out on a savings of 514 to realize that PPP was HUGELY expense in actual 16,000 or savings you had to leave on the table. 

I have been doing DSCR loans (back when they were called Investor cash flow loan) since 2013 or so. They are great products when used correctly, but you have to understand the real cost and not just look at the rate.

[Michael Masters]

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

I track rates by following:
https://www.walkerdunlop.com/funding-your-vision/financing-o...

These are Freddie Mac rates which will be better than what you can get elsewhere, but it will give you an idea of how much rates have moved recently.  See the chart below.

I follow all rates they publish which will be:

*LTV = 0.55 & DSCR = 1.50

*LTV = 0.65 & DSCR = 1.40

*LTV = 0.80 & DSCR = 1.20

*Fixed - 5 yr, 7 yr, 10 yr. Hybrid - 5 yr, 7 yr, 10 yr

All amortized over 30 years even if the loan has an earlier balloon.  Fixed means there is a balloon payment, hybrid means it floats after the fixed rate ends.

If you tell me which loan and what LTV and DSCR will be I can post a specific chart

[Carlo D.]

Quote from @Jay Hurst:

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

 @Carlo D. Rates are only one piece of ANY loan, but especially with DSCR loans. You will hear and read on BP that the rates are the same as conventional but that is NOT really true. It is not really true because to get the same rate it will cost much more in upfront costs in either origination or discount fees, AND much higher back end fees in pre-payment penalties. Some DSCR loans have up to 5 year pre-payment penalties. That kind of a PPP can be hugely expensive if rates drop on the next few years.

Lets play that out and assume a 400k loan at 7% for argument sake. That would be a payment of 2661. Now, lets say rates drop to 5% in 18 months. If you refinanced the same 400k with no PPP at 5% that would be a payment of 2147, or a savings of 514 a month. BUT, if you  are 18 months into a 5 year PPP that would cost you 4% of 400k or 16,000 dollars to refi. So, you likely do not do it. It does not take too many months of missing out on a savings of 514 to realize that PPP was HUGELY expense in actual 16,000 or savings you had to leave on the table. 

I have been doing DSCR loans (back when they were called Investor cash flow loan) since 2013 or so. They are great products when used correctly, but you have to understand the real cost and not just look at the rate.

 @Jay Hurst never done a DSCR loan before so this is new information and very much appreciated. Thank you!

[Carlo D.]

Quote from @Michael Masters:

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

I track rates by following:
https://www.walkerdunlop.com/funding-your-vision/financing-o...

These are Freddie Mac rates which will be better than what you can get elsewhere, but it will give you an idea of how much rates have moved recently.  See the chart below.

I follow all rates they publish which will be:

*LTV = 0.55 & DSCR = 1.50

*LTV = 0.65 & DSCR = 1.40

*LTV = 0.80 & DSCR = 1.20

*Fixed - 5 yr, 7 yr, 10 yr. Hybrid - 5 yr, 7 yr, 10 yr

All amortized over 30 years even if the loan has an earlier balloon.  Fixed means there is a balloon payment, hybrid means it floats after the fixed rate ends.

If you tell me which loan and what LTV and DSCR will be I can post a specific chart

 Thank you @Michael Masters

[Erik Estrada]

Quote from @Michael Masters:

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

I track rates by following:
https://www.walkerdunlop.com/funding-your-vision/financing-o...

These are Freddie Mac rates which will be better than what you can get elsewhere, but it will give you an idea of how much rates have moved recently.  See the chart below.

I follow all rates they publish which will be:

*LTV = 0.55 & DSCR = 1.50

*LTV = 0.65 & DSCR = 1.40

*LTV = 0.80 & DSCR = 1.20

*Fixed - 5 yr, 7 yr, 10 yr. Hybrid - 5 yr, 7 yr, 10 yr

All amortized over 30 years even if the loan has an earlier balloon.  Fixed means there is a balloon payment, hybrid means it floats after the fixed rate ends.

If you tell me which loan and what LTV and DSCR will be I can post a specific chart

This looks to be a chart for 5+ Unit DSCR loans. I believe he is looking at 1-4 Unit property DSCR rates

[Chafiq Ennaoui]

Quote from @Carlo D.:

Acknowledging that a whole host of factors goes into determining the interest rate on a DSCR loan, I was hoping to get a census of what DSCR interest rates you got (or see your clients getting) to get a general idea of the cost of these loans. TIA.

As of now, DSCR loan interest rates are highly volatile, but we're seeing rates in the 7.25% to 8.5% range. Keep in mind that credit score, LTV, property location, and prepayment penalty all play a role in determining the interest rate. We're advising clients to consider selecting a lower prepayment penalty to refinance if rates decline in the next few years.

[Jacob Sherman]

in the 7's conservatively 

[Debbie Fales]

Right now, our DSCR rates are starting at 6.875% for folks with good credit and experience. For those investors looking to reduce their upfront costs, we also offer Zero Point DSCR loans at a slightly higher rate. Feel free to DM me for a no-obligation quote.

Hope this helps! 

[Stacy Patel]

Hi Carlo,

Interest rates for DSCR loans can vary based on several factors such as property location, borrower's credit profile, and current market conditions. Generally, rates range from 4.5% to 7%. It's always a good idea to consult with multiple lenders to get a better understanding for your specific situation.