Is There a Prepayment Penalty on a DSCR Loan?
There can be, and at the lenders we read you can shape it. One lender with a published DSCR program says there's no prepayment penalty after year 3. Another lets you pay a higher fee or rate for a low or no prepayment penalty option. A third says no-prepayment-penalty options are available if you want to keep a sale or refinance open. Read the penalty terms before you sign.
Last updated October 21, 2026Why it matters on a rental
Because plans change. A prepayment penalty is a charge for paying the loan off early, which happens when you sell the property or refinance it. If you might sell within a few years, or refinance once the rent goes up, the penalty can cost more than a slightly better rate saves.
What you can trade
Price for flexibility. One published option works as a trade: pay a higher fee or rate and the penalty shrinks or goes away; keep the penalty and the fee or rate stays lower. Ask the lender to quote it both ways so you can compare the total cost over the years you expect to keep the loan.
What to ask a lender
- Is there a prepayment penalty, and for how many years?
- How is it figured, and does it step down each year?
- Does it apply if I sell, or only if I refinance?
- What does it cost to reduce it or remove it?
| Penalty | Varies by lender; one lender's ends after year 3 |
|---|---|
| Options | Lower or no penalty for a higher fee or rate at one lender; no-penalty options at another |
| When it bites | Selling or refinancing early |
| What to get | The penalty terms in writing, quoted with and without it |
Related questions
Sources
- https://www.kiavi.com/loans/dscr
- https://limaone.com/rental/detail/
- https://www.griffinfunding.com/non-qm-mortgages/dscr-loans/
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.