Prepayment penalties on DSCR loans for paying extra?

[Joseph Agins]

Loan Commitment states:

 "There is a prepayment penalty of 1% on the loan for any partial or full principal reduction payments made before the end of the fifth year. After the fifth year the loan can be paid off with no prepayment penalty."

So, would the PPP trigger for simply paying a little extra on monthly payments?  I need to confirm with the lender but assume any such "partial" payments would have to be substantial and equal to at least 10-20% or more of the total loan?

[John Wade]

Hi Joseph, you would have to get the specifics on this particular DSCR pre-payment penalty, but they usually apply after there's been a greater than 20% principle reduction.