Prepayment Penalty Rules for DSCR Loans in Michigan

Prepayment Penalties are Allowed with a Maximum Fee of 1% and Maximum Duration of 3 Years for DSCR Loans in Michigan. Michigan permits prepayment penalties on DSCR Loans under the exemption provided by MCL § 438.31c, which governs “regulated loans” including business-purpose and non-consumer transactions. The statute allows a prepayment penalty only within the first 3 years of the loan term and limits the penalty to no more than 1% of the unpaid balance. This restriction applies even to loans made at usury-exempt rates when secured by residential real estate. The Michigan DIFS Bulletin No. 2003-05-CF confirms that this 1%/3-year cap applies to exempt mortgage loans, including business-purpose loans like DSCR Loans. As a result, DSCR Lenders in Michigan typically offer only 1/1/1, 1/1, or 1-year flat prepayment penalty structures for loans secured by properties in the Great Lakes State.

FULL Complete 2026 Guide To DSCR Loan Prepayment Penalties

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