adapted from my dscr loans guide - more relvant now than ever with the crazy rates right now

See a lot of "what are DSCR rates right now?" posts on here, and the honest answer is it depends a LOT on how you structure the loan - theres no single rate even for the same borrower on the same property. Figured I'd share a real example of what I mean.

Same deal on all 5: $500k SFR purchase in a suburban market, LLC borrower with a 745 FICO, $3,300/mo rent, $375/mo taxes and $110/mo insurance.

Option 1 - 80% LTV, 7.000% with 2.5 points, 5-4-3-2-1 step-down prepay. Max leverage, but DSCR is only 1.05x and the points are covering the higher-LTV pricing hit.

Option 2 - 75% LTV, 6.750% with 2.5 points, flat 5% prepay for 5 years. Lowest rate of the bunch, roughly $230/mo less than Option 1 and DSCR goes to 1.13x, but you're locked in with a pretty harsh prepay.

Option 3 - 75% LTV, 7.500% with 0.75 points, same 5-year prepay. Way less out of pocket at closing, but the payment runs about $191/mo more than Option 2, so its roughly a 35 month breakeven on the points - if you think you'll refi or sell before then this one usually wins.

Option 4 - 70% LTV, 7.750% with 0 points ("par"), 5-year prepay. No closing fee, and even with the higher rate the cash flow is fine (1.10x) because the loan is smaller - the extra down payment is still your equity, not money lost.

Option 5 - 75% LTV, 8.500% with 1.5 points, NO prepay. Full flexibility but you pay for it, and it took a 5/6 ARM with partial interest-only just to get the DSCR to 1.05x.

A few takeaways - when you're comparing quotes make sure you're comparing the same LTV, points AND prepay, otherwise a "lower rate" from one lender can easily cost more in the end. Figure out your hold period first (are you refinancing in 2 years or holding 10?) and the right structure usually becomes pretty obvious. And if you're in a state that restricts prepays, expect the no-prepay pricing to be your starting point.