Points are just pre-paid interest.

Literally after receiving the letter I got a text that they are making more money and paid the past two months with late fees, and prepaid rent for September as well. 

SFRValue$165,000.00LTV75.00%Loan Amount$123,750.00Rent1650Taxes1882Insurance750Dues0Rate5.125%Balance123750Loan Payment$673.80Total PITIA$893.14Residual Income$756.86DSCR1.84730-year fixed, 5 year prepayment penalty (1% of prepaid balance)75% LTV at 5.125%DUPLEXValue$175,000.00LTV75.00%Loan Amount$131,250.00Rent1725Taxes2232Insurance744Dues0Rate5.125%Balance131250Loan Payment$714.64Total PITIA$962.64Residual Income$762.36DSCR1.79230-year fixed, 5 year prepayment penalty (1% of prepaid balance)75% LTV at 5.125% (the same for both scenarios)

The requirements (that I got from my lender) are: "the new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV and HCLTV ratios for the cash-out transaction based on the current appraised value)."

Even if you plan to represent yourself to avoid paying agent fees, I'd still expect there to be pre-paid expenses like property taxes, homeowner’s insurance, mortgage interest, title insurance/search fees, government recording fees, surveys, appraisals, attorney's fees, etc. 

Prepaids - If you escrow taxes and insurance they must hold and charge appropriate months for Tax/Insurance3.

If a Loan is sold to Sprout that is subject to a prepayment penalty, then the term of the prepayment penalty must be 3 years, and the prepayment must be for 6 months of interest on such portion of the loan principal that is (i) prepaid within the term of the prepayment penalty, and (ii) exceeds 20% of the original principal amount of the Loan.

I've heard of fellow investors doing this with their commercial loans with prepaid interest penalties, but I'm not sure if these could be done on conventional loans without refinancing.If anyone has done this, would be interested in hearing about how you did it and what penalties/fees were involved.Thanks!

The Home Depot Prepaid Mastercard® is issued by MetaBank®, Member FDIC, N.A., pursuant to a license from Mastercard International Incorporated.

Unless you are including your taxes/insurance-prepaids?