DSCR 5 Year pre pay vs 1 year pre pay

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DSCR 5 Year pre pay vs 1 year pre pay

Rajesh KasturiPro Member
Member since 2021 · 19 posts · 15 votes

Team, Anyone did recent DSCR with rate and term.

Below are my lenders gave me with 700 credit score or 720 credit score. 

5-4-year prepayment- 6.875%

5 year prepay @6.5%:

3 yr Prepayment-7%

2yr Prepayment- 7.125%

1yr Prepayment- 7.25%

1 Year Prepay @7.5%

Should I go with low interest 5 years prepay and 1 year prepay and high interest.

My Goal:

Lock rate long term predictable.

Is 6.5 good rate for 5 years period. 

Not sure I can predict rates for next 5 years. 

Need your expert inputs 

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  • Clayton Silva
    Lender · CA · Member since 2018 · 635 posts · 393 votes
    11mo

    I don't generally recommend a PPP longer than 2-3 years right now personally/professionally. I would also make sure there are no other non QM products you qualify for. For example, had a client come with a DSCR quote with a 3 year PPP and we quoted her a lower rate with no PPP on an entirely different Non QM product. DSCR is great, but there are a ton of new products hitting the market that people are completely unaware of.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    11mo
    Quote from @Rajesh Kasturi:

    Team, Anyone did recent DSCR with rate and term.

    Below are my lenders gave me with 700 credit score or 720 credit score. 

    5-4-year prepayment- 6.875%

    5 year prepay @6.5%:

    3 yr Prepayment-7%

    2yr Prepayment- 7.125%

    1yr Prepayment- 7.25%

    1 Year Prepay @7.5%

    Should I go with low interest 5 years prepay and 1 year prepay and high interest.

    My Goal:

    Lock rate long term predictable.

    Is 6.5 good rate for 5 years period. 

    Not sure I can predict rates for next 5 years. 

    Need your expert inputs 


     completely up to you (also happy to give you a quote and see if we can do better) but it is basically how long you gonna hold it and is it a 5-4-3-2-1 PPP. If after 2 years you are paying 3% in prepayment, is that ok versus paying it upfront in the higher interest ? 

    If you are gonna hold it then I would stick with the 5 year as I am not betting on rates going down far enough to make it worthwhile on refinancing. If it is something you are unsure of then consider a 2 or 3 year prepayment. But again, this is more a business decision in how you operate and every person is very different.

    7e investments53 Reviews
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  • Frankie VozziBusiness Member
    Member since 2025 · 327 posts · 82 votes
    11mo

    Hey Rajesh! Interesting post, the "best" DSCR option really depends on your long-term goals. I've been seeing clients lock 30-year DSCRs in the mid–6's with strong credit, while others choose shorter prepay terms for flexibility, even if the rate is a little higher, I sent you a DM, happy to connect!

    [email protected]516-888-7750
    0Reply
  • Derek BrickleyBusiness Member
    Lender · Ann Arbor, MI · Member since 2021 · 663 posts · 226 votes
    11mo

    Hey Rajesh!

    I second what Clayton mentioned. Based on that, I'd recommend sticking around the 3 year mark. As long as your cashflow is solid and you're happy with it, all forecasts show within 3 years you should be able to refi lower. You could take a prepayment penalty when you refinance as well so it's not a use it or lose it type thing. I don't know anything about your deal of course, but it may be useful for you to consider other DSCR options since each will behave differently. Not sure what your overall goal is for the property either but feel free to reach out if that might be helpful

    [email protected]734-645-7722
    Gold Star Mortgage Financial Group547 Reviews
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  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    11mo

    Define your goals and your timeline first.

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    11mo
    Quote from @Rajesh Kasturi:

    Team, Anyone did recent DSCR with rate and term.

    Below are my lenders gave me with 700 credit score or 720 credit score. 

    5-4-year prepayment- 6.875%

    5 year prepay @6.5%:

    3 yr Prepayment-7%

    2yr Prepayment- 7.125%

    1yr Prepayment- 7.25%

    1 Year Prepay @7.5%

    Should I go with low interest 5 years prepay and 1 year prepay and high interest.

    My Goal:

    Lock rate long term predictable.

    Is 6.5 good rate for 5 years period. 

    Not sure I can predict rates for next 5 years. 

    Need your expert inputs 


     I would recommend a step-down penalty with the least amount of points. The rate is important, but I think going with a low point/no point option works in your favor with a shorter, flexible prepay than a hard penalty with higher points. 

    I have clients that I closed in 2023 at high 7% rate with a 5 year PPP, since at that time they thought rates would stay the same. Now rates are in the low to mid 6s at par. This is a time where you need to have flexibility in your financing. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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    • Erik EstradaBusiness Member
      Lender · Member since 2022 · 6k+ posts · 1k+ votes
      11mo
      Quote from @Erik Estrada:
      Quote from @Rajesh Kasturi:

      Team, Anyone did recent DSCR with rate and term.

      Below are my lenders gave me with 700 credit score or 720 credit score. 

      5-4-year prepayment- 6.875%

      5 year prepay @6.5%:

      3 yr Prepayment-7%

      2yr Prepayment- 7.125%

      1yr Prepayment- 7.25%

      1 Year Prepay @7.5%

      Should I go with low interest 5 years prepay and 1 year prepay and high interest.

      My Goal:

      Lock rate long term predictable.

      Is 6.5 good rate for 5 years period. 

      Not sure I can predict rates for next 5 years. 

      Need your expert inputs 


       I would recommend a step-down penalty with the least amount of points. The rate is important, but I think going with a low point/no point option works in your favor with a shorter, flexible prepay than a hard penalty with higher points. 

      I have clients that I closed in 2023 at high 7% rate with a 5 year PPP, since at that time they thought rates would stay the same. Now rates are in the low to mid 6s at par. This is a time where you need to have flexibility in your financing. 


       The ARMs are pricing very well. Try to look for ARMs if your strategy is to keep the loan for no more than 3-5 years. 

      [email protected]818-269-7983
      LuxePrivate Investments LLC 572 Reviews
      WebsiteView Page
      0Reply
  • Andrew Zamboroski
    Lender · Member since 2021 · 495 posts · 130 votes
    11mo
    Quote from @Rajesh Kasturi:

    Team, Anyone did recent DSCR with rate and term.

    Below are my lenders gave me with 700 credit score or 720 credit score. 

    5-4-year prepayment- 6.875%

    5 year prepay @6.5%:

    3 yr Prepayment-7%

    2yr Prepayment- 7.125%

    1yr Prepayment- 7.25%

    1 Year Prepay @7.5%

    Should I go with low interest 5 years prepay and 1 year prepay and high interest.

    My Goal:

    Lock rate long term predictable.

    Is 6.5 good rate for 5 years period. 

    Not sure I can predict rates for next 5 years. 

    Need your expert inputs 

    Depends on your holdings strategy and loan amount. .5% on a 75k loan will have minimal savings compared to a 750k loan. You could easily pay 3-5% in a prepayment penalty that would negate years of rate savings if it does not make sense. Happy to give a second glance.

    0Reply
  • Jake YuskaitisBusiness Member
    Lender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
    11mo

    Was that a bank or private money?

    [email protected]551-287-6884
    Frontier Funding LLC533 Reviews
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  • Zachary DealPro Member
    Lender · Member since 2023 · 464 posts · 425 votes
    11mo
    Quote from @Rajesh Kasturi:

    Team, Anyone did recent DSCR with rate and term.

    Below are my lenders gave me with 700 credit score or 720 credit score. 

    5-4-year prepayment- 6.875%

    5 year prepay @6.5%:

    3 yr Prepayment-7%

    2yr Prepayment- 7.125%

    1yr Prepayment- 7.25%

    1 Year Prepay @7.5%

    Should I go with low interest 5 years prepay and 1 year prepay and high interest.

    My Goal:

    Lock rate long term predictable.

    Is 6.5 good rate for 5 years period. 

    Not sure I can predict rates for next 5 years. 

    Need your expert inputs 


     What are the points and lender fees? Hard to evaluate these options without knowing the lender costs associated with each

    [email protected]
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