Investor · Member since 2024 · 79 posts · 28 votes
I've noticed that DSCR rates are much cheaper than conventional rates right now. It's still possible to get a DSCR loan at 6.5%, while conventional investment property rates are at a minimum of 7.5%.
Lender · Springfield, MO · Member since 2023 · 108 posts · 78 votes
11h
It is possible to get a 6.5% still with DSCR. I think if you are looking for a par priced loan and max leverage you may not get to that, but reduced leverage or buy down and it is certainly there.
Normally DSCR loans price above conventional, so when you see it the other way, I'd check that you're comparing the same loan. A few things to line up:
- Leverage. DSCR rates are usually quoted at lower LTV (60-65%). At 75-80% the rate typically steps up.
- Points. A 6.5% quote with 2 points isn't a 6.5% loan. A rough rule is that 1 point buys about 0.25% off the rate. On $250K, 2 points is $5,000 to save about $83/month ($1,663 at 7.0% vs $1,580 at 6.5%), a break-even of about 60 months.
- Prepayment penalty. A typical DSCR structure is 5-4-3-2-1, so you're paying for a lower rate by committing to hold or paying out of the proceeds when you sell or refi.
- Conventional pricing. Investor conventional loans carry extra pricing adjustments on top of the base rate. Ask for the rate with no points, then compare.
At the same LTV and the same points, the monthly difference between 6.5% and 7.5% on $250K is about $168 ($1,580 vs $1,748), or about $2,000 a year. That's what a prepay penalty or points should be measured against.
Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 865 votes
1h
I’d definitely compare the two, but I wouldn’t look at the interest rate alone. Look at the fees, prepayment penalty and overall terms too. Sometimes the cheaper rate isn’t actually the cheaper loan.
Investor · Collierville, TN 38017 · Member since 2017 · 671 posts · 484 votes
51m
The rate is the wrong thing to shop. I refi every BRRRR into DSCR at 70-80% LTV, and what I care about is whether the rent covers the payment with real cash flow left over. A 6.5% quote at 60% LTV or with 2 points isn't a 6.5% loan — it's a different loan. At 75-80% LTV the rate steps up, and that's the number that matters because that's where my refi actually prices. So compare apples to apples: same LTV, same points, then check whether your rent clears the DSCR coverage the lender needs. If the coverage works and it cash flows, I take the loan. The headline rate is just marketing until you see the leverage and the points. Practical takeaway: get every quote at the LTV you'll actually borrow, then run the coverage.