DSCR Loan Rates and Costs
Last reviewed September 2026
The short answer: DSCR rates run roughly 0.5–1.5% above conventional investment-property rates, origination is typically 1–2% against 0–1% conventional, and total closing costs land around 2–5% of the loan. The cost most people miss is the prepayment penalty — nearly every DSCR loan has one, and it is the line item that decides whether the loan is cheap or expensive for your actual holding plan.
Rate pages for DSCR loans are almost all published by the lenders quoting the rates, and they are organised around getting you to a form. What follows is the cost structure itself: what moves your quote, what you pay at closing, and how the exit penalty works — the part that most changes the true cost and is least often shown up front.
Why the rate is higher
A DSCR loan cannot be sold to Fannie Mae or Freddie Mac, because no personal income was verified. It is held in a portfolio or sold to private investors, and it is secured by rent rather than by a salary. That is more risk, and the premium — roughly half a point to a point and a half over a comparable conventional investment loan — is the price of it.
Through 2026 that has generally meant DSCR pricing in the 6.5–8% range against conventional investor loans in the mid-6s, with the strongest files reaching the low-to-mid 6s. The spread has narrowed as more lenders entered the space. Rates move weekly, so use those figures to understand the shape of the pricing, not as a quote — and never as the basis for a purchase decision without a current written quote.
Whether the premium is worth paying is a numbers question, not a philosophical one. Run the same property at both rates on the mortgage calculator and see what it does to your cash flow. Often the DSCR loan costs a few hundred dollars a month more and is still the only loan available to you — which makes the comparison academic.
What drives your quote
DSCR pricing is a grid, not a single number. These are the inputs that move it:
Your DSCR ratio
The single biggest lever. Crossing 1.0, then 1.25, typically steps pricing down. Below 1.0 you pay for the exception.
Credit score
Priced in bands. 680, 700, 720 and 740 are common breakpoints, and the gap between the bottom and top band can exceed a full point.
Loan-to-value
Putting 25% down instead of 20% usually buys a better rate as well as a smaller loan. Both effects push the payment down.
Prepayment penalty term
Accepting a longer penalty lowers your rate. Declining one entirely raises it. See below — this is the least understood trade on the sheet.
Property type
Single-family prices best. 2–4 unit, condo, and short-term-rental income models each carry add-ons at most lenders.
Loan purpose
Cash-out refinances price above purchases and rate-term refinances, often by 0.25–0.50%.
Entity and experience
Closing in an LLC is standard here. Some lenders price better if you have owned rentals before.
Closing costs, line by line
Typical ranges for a single-family rental. Totals usually land at 2–5% of the loan amount.
| Cost | Typical | Notes |
|---|---|---|
| Origination fee | 1–2% of loan | Higher than conventional, where 0–1% is normal. This is the line most worth negotiating or shopping. |
| Appraisal | $500–$1,200 | Includes the rent schedule. 2–4 unit and rural properties cost more and take longer. |
| Title and settlement | $1,000–$3,000 | Varies widely by state; in some states you can choose the title company. |
| Lender and processing fees | $800–$2,000 | Underwriting, processing, document prep. Bundled differently by every lender, which is why you compare totals. |
| Points (optional) | 0–2% of loan | Buying the rate down. Worth it only if you will hold past the break-even, which is often 4–6 years. |
| Prepaids and escrows | Varies | Property tax and insurance reserves. Not a lender charge — money you would owe anyway, collected early. |
These sit on top of your down payment and reserves. To see the full cash requirement rather than the loan cost alone, use the cash-to-close calculator.
The prepayment penalty is the cost nobody leads with
Nearly every DSCR loan carries a prepayment penalty, and it is usually presented as a structure like 5/4/3/2/1 — 5% of the remaining balance if you pay off in year one, 4% in year two, and so on to zero after year five. Pay off a $380,000 balance in year three under that structure and the penalty is 3%, or $11,400.
What makes this worth understanding rather than merely noting is that it is a priced option. Lenders publish a menu, and the rate you are quoted depends on which one you take:
| Structure | Rate impact | What it means |
|---|---|---|
| 5/4/3/2/1 | Base rate | 5% of the balance in year one, stepping down 1% a year. The cheapest rate, the least flexibility. |
| 3/2/1 | About +0.25–0.50% | Three-year exposure. A common middle ground for a buy-and-hold with a possible refinance. |
| None | About +0.50–1.00% | Full flexibility to sell or refinance any time. You pay for it in every monthly payment. |
This means a lender quoting a notably low rate may simply be quoting the longest penalty. Two quotes are not comparable until you know the structure behind each one — and that information is often absent from the first quote you receive.
The decision follows from your holding plan, not from the rate. If you expect to sell or refinance inside three years, a long penalty is likely to cost more than the rate premium you would have paid to avoid it. If you are genuinely buying and holding for a decade, paying 0.5–1.0% more every month for an exit you will never use is expensive insurance.
One structure deserves separate attention: yield maintenance. Instead of a fixed percentage, it charges the present value of the interest the lender loses. When market rates have fallen below your note rate, that can exceed even a 5% step-down penalty. When rates have risen, it can be close to zero. It is less common on residential DSCR loans than on commercial ones, but if you see the term in a quote, price the worst case before you sign.
How to compare quotes
Ask every lender for the same four things in writing: the rate, the origination fee, the prepayment penalty structure, and whether the DSCR is calculated on principal-and-interest or full PITIA. Those four determine almost everything, and only the first is usually volunteered.
Then compare on total five-year cost rather than on rate: payment × 60, plus origination and fees, plus the penalty you would owe if you exited in year three. A quote that wins on rate frequently loses on that arithmetic. Because DSCR overlays are set lender by lender, spreading three or four quotes is worth more here than in conventional lending, where pricing converges.
Frequently asked questions
How much higher are DSCR loan rates than conventional?
Roughly 0.50% to 1.50% above a comparable conventional investment-property rate, with the spread most often landing around 0.75–1.5% in 2026. In practice that has meant DSCR pricing in the 6.5–8% range while conventional investor loans sat near the mid-6s, with well-qualified borrowers reaching the low-to-mid 6s. Rates move constantly, so treat any published figure — including this one — as a reference point rather than a quote.
Why are DSCR loan rates higher?
Because the lender is taking more risk and cannot sell the loan to Fannie Mae or Freddie Mac. There is no verified personal income behind the file, only the property's rent, and the loan is held in a private portfolio or sold to private investors. That pricing is the cost of skipping income documentation and of the higher property limits — it is what you are buying.
How much does a DSCR loan cost in closing costs?
Generally 2–5% of the loan amount, commonly landing somewhere around $6,000–$15,000 on a typical single-family rental. Origination is the largest single line at 1–2%, versus 0–1% on conventional. Compare lenders on a full itemized quote rather than on the rate alone, because origination and lender fees vary far more between DSCR lenders than the rate does.
Do DSCR loans have a prepayment penalty?
Almost always, and this is the most important thing to understand about their cost. Most DSCR loans carry a penalty for paying off early, typically as a step-down like 5/4/3/2/1 or 3/2/1 — a percentage of the remaining balance that shrinks each year. You can usually buy a shorter penalty, or none at all, in exchange for a higher rate. Ask for the penalty structure in writing before you compare quotes.
How is a DSCR prepayment penalty calculated?
Usually as a percentage of the remaining principal at payoff. Under a 5/4/3/2/1 structure, paying off in year three with a $380,000 balance triggers 3% of $380,000, or $11,400. A minority of loans use yield maintenance instead, which calculates the present value of the lender's lost interest — that can cost considerably more than a step-down when rates have fallen, and close to nothing when rates have risen.
Can you avoid the DSCR prepayment penalty?
You can buy it off, at roughly 0.50–1.00% on the rate. Whether that is worth it depends entirely on your holding plan: if you are likely to sell or refinance inside three years, the penalty usually costs more than the rate premium; if you are holding long term, paying a higher rate for flexibility you will never use is expensive. Some structures also allow partial paydowns or a sale exemption — ask, because these vary by lender.
Are DSCR loan points worth paying?
Only if you will hold the loan past the break-even, which commonly falls around four to six years. Work out the monthly saving, divide the point cost by it, and compare the result to how long you realistically expect to keep the loan. If there is a prepayment penalty in the first three years, factor that in too — paying points and then exiting early is the worst combination of the two.
Do DSCR rates change once the loan closes?
Most DSCR loans are 30-year fixed, so the rate is set at closing. Adjustable and interest-only options exist, along with 5/1 and 7/1 ARM structures, and those do reset. Confirm which product you are quoted — an interest-only DSCR quote will show a much stronger coverage ratio than the same loan amortizing, which makes it look better than it is.
Related reading
DSCR loan requirements covers the qualifying bar and what gets applications declined. DSCR vs. conventional weighs the rate premium against what the conventional loan will not do, and how many DSCR loans you can have covers scaling a portfolio.
See what the rate does to the deal
Run the property at your quoted rate and see cash flow, coverage and a verdict — free, no signup.
Open the Rental Property Calculator →Rate and cost figures reflect typical DSCR programs as of September 2026 and change frequently. Nothing here is a quote or an offer of credit, and none of it is lending or investment advice — see our financial disclaimer.