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What does “Stub Interest” in relation to DSCR Loans mean?
#1 Private Lending & Conventional Mortgage Advice Contributor
- Lender
- Austin, TX
Q: What does “Stub Interest” in relation to DSCR Loans mean?
A: Stub Interest, also called "Prepaid Interest" or "Upfront Interest," is the interest due between the DSCR loan's closing date and the end of that same calendar month. It's paid at closing so the loan can begin on a clean, monthly amortization schedule. For example, if a DSCR loan closes on July 11, 2025, interest will be charged for the remaining 21 days of July (calculated as interest rate × loan amount × 21 ÷ 365) and collected at closing. The first full monthly payment — covering interest for August 1 to August 31 — would then be due on September 1, 2025.
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