No prepayment penalty vs 3 yrs vs 5 yrs for current market

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No prepayment penalty vs 3 yrs vs 5 yrs for current market

Hyeseong Park
Rental Property Investor · Philadelphia, PA · Member since 2023 · 68 posts · 18 votes

What is the best option for prepayment penalty you think these days if I want to go with DSCR loans?

I assume that there is a big chance that the rate can drop a bit more due to elections at the end of next year so govern may decrease the interest rate. which means I should probably go with no PPP and do refinancing next year? what do you think the trend will be?

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Logan Padilla
Lender · Los Angeles · Member since 2023 · 19 posts · 7 votes
2y
Quote from @Hyeseong Park:

What is the best option for prepayment penalty you think these days if I want to go with DSCR loans?

I assume that there is a big chance that the rate can drop a bit more due to elections at the end of next year so govern may decrease the interest rate. which means I should probably go with no PPP and do refinancing next year? what do you think the trend will be?


We have a no PPP DSCR product that also offers highly competitive rates in the arena.

We anticipate rates to continue to fall. No crystal ball, of course, but getting in with no PPP and refinancing in 12-18 months is a solid strategy.

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  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    2y

    @Hyeseong Park

    I just had this same option. I went with the 3 year. I have a feeling rates will be much lower within 3 years. If so, I’ll do a cash out refi and snag the lower rate. 5 years is way to long. I may need some of this equity sooner than 5 years. I’m paying 7.5% interest and thinking rates will be in the 6% range within 3 years.

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
    2y

    no more than 24 months at this point.

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  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    2y

    The pre-payment penalty is very specific to your game plans. Is it possible that rates come down soon, yes, but know one can actually predict the future accurately. Generally, you will need the rate on the new refinance to be 1% lower than your current rate or lower. At that point, it should not take any more than 2.5-5 years to recoup your refinance closing costs with the new lower rate and payment. Longer than 5 years and the loan is to costly. Look at the difference of the rate versus the lesser pre-payment penalty time frame to decide the cost difference to the rate or costs. I hope this helps? 

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