Are Prepayment Penalties Allowed on DSCR Loans in Ohio?

[Robin Simon]

Prepayment Penalty Rules for DSCR Loans in Ohio

Prepayment Penalties are Allowed with no restrictions on 3-unit or 4-unit properties and Allowed with Restrictions secured by 1-unit or 2-unit properties in Ohio. For one or two-unit properties securing loans with loan amounts above $116,356 (2026), prepayment penalties are limited to a Maximum Fee of 1% and maximum duration of 5 Years. Prepayment Penalties are Not Allowed on DSCR Loans in Ohio for one or two-unit properties with loan amounts below that threshold ($116,356 in 2026 but adjusted annually).

Ohio permits prepayment penalties on DSCR loans, subject to property type and loan size restrictions outlined in Ohio Revised Code § 1343.011. The statute draws a key distinction between 1–2 unit residential properties and properties containing three or more units. Prepayment penalties are fully permitted without restriction on DSCR loans secured by 3-unit or 4-unit properties. These property types fall outside the definition of “residential mortgage” under the statute and are not subject to its limitations. For DSCR loans secured by 1-unit or 2-unit properties, Ohio law permits prepayment penalties only if the original principal balance exceeds the statutory threshold established annually by the Ohio Department of Commerce. For calendar year 2026, that threshold is $116,356.

When the original loan amount exceeds this threshold (SFRs or duplexes), the maximum prepayment penalty fee is 1% of the original principal balance and the maximum term during which a penalty may apply is five years. As such, if the loan amount is equal to or less than the annual threshold, no prepayment penalty is permitted under any circumstance. DSCR Lenders then can generally offer standard prepayment penalty structures (like 5/4/3/2/1) on properties with three or more units, but are limited to Flat, 1% structures (like 1/1/1) if the loan is secured by single family residences or duplexes and the balance is above $112,957. Finally, no prepayment penalties are allowed to be imposed at all on smaller loans (original balance below $116,356) secured by one- or two-unit properties in the Buckeye State.

FULL Complete 2026 Guide To DSCR Loan Prepayment Penalties

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