On this episode, Caeli Ridge breaks down how to buy a rental property using a DSCR loan — a type of financing where the lender doesn’t care about your personal income.
Instead, the loan is based on the income the property will generate. Caeli walks us through real examples of what kind of purchase price and rent numbers make a deal work, how lenders determine expected rent, and what kind of down payment you'll need. We also cover:
1-855-747-4343
info@ridgelendinggroup.com
RidgeLendingGroup.com
Thanks To Our Sponsor:
RentalTrial - Rental accounting software made easy
- No tax returns.
- No pay stubs.
- No bank statements.
Instead, the loan is based on the income the property will generate. Caeli walks us through real examples of what kind of purchase price and rent numbers make a deal work, how lenders determine expected rent, and what kind of down payment you'll need. We also cover:
- The types of properties that qualify
- How DSCR loan rates compare to traditional financing
- Prepayment penalties to watch out for
- Whether cash-out refis are possible with this loan type
1-855-747-4343
info@ridgelendinggroup.com
RidgeLendingGroup.com
Thanks To Our Sponsor:
RentalTrial - Rental accounting software made easy
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
This is a bonus episode of the Rebel Income podcast.
And now there's a ton of different ways to finance
a rental property and one of the newer loan types
is a DSCR loan, and it's come up a few
times over the last few episodes, and I thought it
might be an interesting bonus episode today to look at
(00:22):
a DSCR loan and figure out exactly how it works. So, Chayley,
can you explain to us what is a DSR loan?
Speaker 2 (00:31):
I would be very happy to. So let's start with
what the abbreviation stands for. DSCR is debt service coverage
ratio And simply said everybody, this is just a way
of qualifying a loan using the income of the property
only divided by the new mortgage payment that you're securing,
(00:52):
and coming up with a ratio. It's as simple as that.
It's a very very easy calculation by taking gross rents
and dividing it by the pro posed principal interest, taxes,
insurance and h way, if applicable.
Speaker 1 (01:05):
The lender isn't going to want to see your tax returns,
your pay dubs, your bank statements. They don't care for
your self employed or how long you've been at your
job for. They're just going to look at the rental
property and see if it makes sense. And on the
show today, Chailey is going to break down the DSCR
a loon and tell you everything you need to know.
(01:25):
Joining us on the show today is Chailey Ridge. I
want to let you know about a really easy way
to track your rental income and expenses. It's an accounting
software custom made for rental property investors. It takes just
seconds to enter an expense or to record that you
collected rent. It makes tax time really easy. Just run
(01:46):
a report and give it to your tax person and
you are done. They're currently offering a free thirty day trial.
There's no credit card required, so if you don't like it,
there's nothing to cancel. You can learn more and sign
up today at rentaltrial dot com. That's Rental Trial t
R i a l rentaltrial dot com. If you've been
(02:08):
listening to the podcast for a while, I'm sure you
know that Chailey is a sponsor of the podcast. But
with that being said, she's not paying to be here today.
She's not sponsoring this episode. She's just here to talk
about DSCR loans. So With that being said, Chailey, why
don't we start with who this loan is for? I imagine
that not everybody is a perfect fit for a DSCR loan,
(02:33):
So who is this loan? For sure?
Speaker 2 (02:35):
There could be a few instances where I think an
investor is going to benefit most by a debt service
coverage ratio product. So first would be those individuals that
maybe have maxed out or exhausted those golden tickets. If
you remember, we call Ridgelanding calls Fanny Freddilan's golden tickets
highest leverage, lowest interest rate. There are ten of these
per qualified individual So for those investors that have maxed
(02:59):
those out, they've already exhausted the ten. Then they typically
will pivot into or organically evolve into the DSCR. Those
rules and rags about how many finance properties one individual
can hold is removed when we get into the non
QM space, which is where DSCR lives. The other individuals
(03:20):
are going to be those that cannot show the vials
of blood DNA samples necessary to qualify for those Fanny
Freddy loans. So let's say that you've got a self
employed individual or someone that's just recently become self employed.
There could be lots of different nuanced reasons to this.
But if you cannot fit into the Fanny Freddy underwriting
guideline box via debt to income ratio, maybe some credit issues,
(03:44):
whether it be the score or recent drug stuff that
may have come up, or assets down payment and reserve requirements,
they're a lot looser on the DSCR loan product.
Speaker 1 (03:57):
All right, let's talk about what a bar or actually
needs or like, what you're looking for in a loan application.
Speaker 2 (04:05):
Okay, so let's talk about the like the income piece.
We're not looking for any kind of ordinary income documentation zero,
so there'll be no pay stubs, no tax returns, no nothing. Again,
the product is going to base the qualification off of
the gross rents of the subject property. Okay, I'll come
back to that in a minute. Next in the credit department,
(04:26):
so there's not going to be hard and fast minimum
credit scores the way you would find with a Fanny Freddy.
You know, we've got six fifty credit scores getting approved
for DSCR loans. They're probably going to take a hit
in the interest rate department if you're under certain thresholds.
But six point fifty would probably be the threshold, I
would say, or the minimum that an individual needs to
(04:47):
come with to qualify. And then on the asset side,
you've got to have your you know, twenty percent down.
I'm starting to find that there may be some loosening
of the purse strings. There's been a few announcement recent
or announcements recently, nothing official, but we may start seeing
eighty five percent loan two value on DSCR purchases, so
(05:09):
be on the lookout for that. But so the sourced
and seasoned down payment is a lot less gratuitous when
we're talking about this versus the Fanny Freddy. You only
probably need to show in some cases a week's worth
of seasoning for a down payment versus the two months
that would be required for a conventional loan. And then
(05:29):
the reserve requirement also is a lot less invasive. Depending
on the transaction, you may only need to show six
to twelve months PTI of the subject property only. And
for those that just in comparison, know what the reserve
requirement for Fanny Freddie is. They take the sum of
all investment properties owned and unpaid balances and come up
(05:51):
with a kind of a complicated formula, So a lot
less regulation, a lot less paper pushing with the all
in one or excuse me, with the DSCR loans.
Speaker 1 (05:58):
So the big thing is, it's just the purchase price
and the rent price. That's really what the lender cares about.
Speaker 2 (06:06):
Yeah, the big thing is is really just making sure
that we get that one point oh or greater debt service.
And let me just take a minute and define that
and give an easy math example. So remember we're taking
gross rents and we're dividing it by the PITI principal interest,
tax and insurance HA if it applies. So the easy
math example I give most often is if the gross
rents were one thousand dollars a month and the PITI
(06:28):
was one thousand dollars a month, we're going to get
a one point oh or greater DSCR. We have products
on our DSCR line that will let us go to
as low as point seventy five on the DSCR calculation.
So for those that want to hear the math, that
would mean that the rents were seven hundred and fifty
and the PITI was a thousand. Those loans can get done,
we can do them, but be prepared to have a
(06:50):
nice big hit to the interest rate. More often than not,
most people fall in the one point oh and greater
and then the reverse. I may comment, if you have
a DSCR that's one two five and above, you can
expect a slightly improved rate versus the higher rate at
that point seventy five too point nine to nine?
Speaker 1 (07:08):
How does it work out with figuring out what the
rent's going to be? So say someone buys a property
for one hundred thousand dollars and it's going to rent
for one thousand a month, how does how do you
figure out what the rent is going to be before
a tenant is in there?
Speaker 2 (07:24):
Great question? So we are going to glean the income
using the appraisal of an investment property. If there's a lease,
if you if you're on a purchase transaction, if you
get lucky enough that there's a tenant in there, we
will use the lease. But to your point, I think Dan,
more often than not they won't be pre rented, so
we will get the appraisal. And an appraisal for an
investment property comes with two additional forms. The one that's
(07:47):
most important is called a ten oh seven. That's just
the number at the bottom of the page. These are
the rental income comps. So the appraiser is going to
go out and find like kind properties you know, bedroom,
bathroom count, square footage age, et cetera, within ideally like
a one mile radius, and that our tenant occupied. That's
public records. So they're going to take all that added
(08:07):
together and divide by the number of comps they used,
and that's the number that we're going to use as
the gross rent to divide against the piit I. Now
there is a little nuance here. If this is a
short term rental, then obviously knowing that in advance, we
have to get some more data pulled. A lot of times,
air DNA is the software that's used to establish rental income,
(08:30):
especially when it is a short term rental. Otherwise, just
a straight residential investment appraisal is what we'll use.
Speaker 1 (08:38):
So you can use this for regular rentals, short term rentals,
what about mid term rentals?
Speaker 2 (08:44):
Absolutely same thing. Ideally you have data tape or rent
rolls when they're the short term or the midterm that
we can use to quantify whatever the income is going
to be. Otherwise, the air DNA site is largely what
will be used in underwriting for establishing the baseline.
Speaker 1 (09:00):
And what about type of property? So, I mean, obviously
single family is what we've mainly been talking about. Well
what about duplex's, triplex's four plex? Would would they be eligible?
Speaker 2 (09:12):
Absolutely? All residential properties are going to be eligible, so
up to four units, even things like non warrantable condos
or condo tells. Those kind of atypical property types that
you might find difficult with a Fanny Freddy is absolutely
acceptable on a DSCR basis, So that might be another
reason that someone would look at this product versus a conventional.
Speaker 1 (09:34):
So walk me through the process of actually getting approved,
because it seems like you're pulling the credit and then
you're ordering the appraisal, but you're not looking at tax
returns like that. There's just a lot less paperwork involved.
So what's the timeframe from the time that somebody finds
(09:55):
a deal to when you can close on it?
Speaker 2 (09:58):
You know, we set the expectation about thirty to forty
five days just to give us that room, you know,
the extra buffer there can be for the appraisal piece. Right.
The appraisal turntime is really one part of the big
process that we don't have as much control over So
if an appraisal turntime is five days, then the thirty
day expectation is relevant. If it bleeds into seven ten days,
(10:20):
then expect a little bit longer. But thirty forty five
days is usually where we set the mark.
Speaker 1 (10:24):
So really, the only thing that you would need from
the borrower is they're solid security number, right like you're
pulling the credit. But everything else is pretty much they
taken care of it. On your end, it's a lot less.
Speaker 2 (10:42):
Let's just say that we're still going to need things
like drivers license, bank statements to show where the cash
to close is coming from. There's still some paper pushing
and d documentation that is to be received, but definitely
nothing like especially for those that have lots of properties
or maybe those that have multiple tax returns to provide
It is a fraction of the work in the upfront
(11:03):
pre quall that Fanny Freddy Loan would be.
Speaker 1 (11:06):
Now, talk to me about some of the interest rates, Like,
so the rates I assume are going to be higher
just because you're not going through all the documentation, is
that right.
Speaker 2 (11:18):
Well, it's less skin in the game, so yes, I mean,
really about the documentation, right, we're not supplying any of that,
so the risk is higher, in which case the rate
is going to be higher. But I think that people
are surprised by the level of increase between a Fanny
Freddy and a DSCR loan. And it's really important to
remind everybody about those l LPAs that you and I
(11:39):
talk about almost every time we get on one of these,
that stands for Loan level price adjustment. Quick refresher everybody
that is a positive or a negative number that associates
with the loan characteristics. Okay, I won't go down that
rabbit hole. I'll just kind of cut it short and
say that if the transaction details are saying apples to
(12:01):
apples conventional versus DSCR, then you can expect probably a
half to three quarters of percent higher in rate on
a DSCR than you would find on a Fanny Freddy deal.
Speaker 1 (12:11):
Okay, all right, so there's a little bit higher rate,
but you know that's not going to significantly change your payment.
Speaker 2 (12:20):
Depending on loan size, right, it really probably won't. Maybe
it could be five bucks, it could be twenty bucks.
It's probably not significant, you know. And as we're talking
about interest rate, it's worth the mention that even with
that higher interest rate a half or three quarters whatever,
it ends up being reminder to us investors, we get
that benefit on our schedule ecome tax time, so it's
(12:41):
not dollar for dollar a course, but you're going to
have some secondary incentive there.
Speaker 1 (12:46):
What about pre payment penalties? Is there a certain amount
of time you have to keep the loan?
Speaker 2 (12:53):
Very good question, and yes, depending on state you usually laws.
There's certain states that will preclude or prohibit certain pre
payment penalties which will really change the interest rate. But
most DSCR loans come standard with a three year prepayment
penalty thirty six months. The structure of these prepayment penalty
(13:14):
penalties can change, but overall you should expect to hold
the DSCR loan for about three years before refinancing without
a penalty would be viable. Now, the individual always has
the option to buy the prepay down or out, or
conversely they can increase the prepay and reduce the interest
rate going the other way too.
Speaker 1 (13:35):
Okay, And the last question is if someone has a
property with equity in it and they want to cash
out with a DSCR loan, is that possible? Can you
do a cash out.
Speaker 2 (13:47):
REFI Absolutely, we're seeing lots and lots of those these days,
and in fact I will tell you coming very very soon.
I want to say as early as middle July, we
will have eighty percent loan to value on a cash
out refile of a DSCR, which is greater than it
has been in the past. We've been capped at seventy five,
and it's certainly higher than what Fanny Freddie will allow for.
(14:08):
So you'll have a little bit more access and leverage
opportunity to eighty percent single family to four units. The
number of doors up to four in residential is not
going to deter the LTV, but eighty percent is coming.
So pretty excited. We'll be making some announcements about officially
here in the coming weeks.
Speaker 1 (14:26):
Awesome, Well, Chayley, if anyone wants to talk to you
more about this, see if this is a good option
for them. What's the best way for someone to reach
out to you.
Speaker 2 (14:34):
There are so many I'm going to rattle them off
for everybody, So you've got our email info at Ridge
Lendinggroup dot com, toll free eight five five seven four
seven four three four three. The easy way to remember
is eight five five seventy four Ridge and then of
course our website www. Dot ridgelandinggroup dot com.
Speaker 1 (14:54):
Thank you so much for checking out this bonus episode.
I'll be back with a new interview on Tuesday. My
name is Dan Lane and this has been the Rental
Income Podcast
This is a bonus episode of the Rebel Income podcast.
And now there's a ton of different ways to finance
a rental property and one of the newer loan types
is a DSCR loan, and it's come up a few
times over the last few episodes, and I thought it
might be an interesting bonus episode today to look at
(00:22):
a DSCR loan and figure out exactly how it works. So, Chayley,
can you explain to us what is a DSR loan?
Speaker 2 (00:31):
I would be very happy to. So let's start with
what the abbreviation stands for. DSCR is debt service coverage
ratio And simply said everybody, this is just a way
of qualifying a loan using the income of the property
only divided by the new mortgage payment that you're securing,
(00:52):
and coming up with a ratio. It's as simple as that.
It's a very very easy calculation by taking gross rents
and dividing it by the pro posed principal interest, taxes,
insurance and h way, if applicable.
Speaker 1 (01:05):
The lender isn't going to want to see your tax returns,
your pay dubs, your bank statements. They don't care for
your self employed or how long you've been at your
job for. They're just going to look at the rental
property and see if it makes sense. And on the
show today, Chailey is going to break down the DSCR
a loon and tell you everything you need to know.
(01:25):
Joining us on the show today is Chailey Ridge. I
want to let you know about a really easy way
to track your rental income and expenses. It's an accounting
software custom made for rental property investors. It takes just
seconds to enter an expense or to record that you
collected rent. It makes tax time really easy. Just run
(01:46):
a report and give it to your tax person and
you are done. They're currently offering a free thirty day trial.
There's no credit card required, so if you don't like it,
there's nothing to cancel. You can learn more and sign
up today at rentaltrial dot com. That's Rental Trial t
R i a l rentaltrial dot com. If you've been
(02:08):
listening to the podcast for a while, I'm sure you
know that Chailey is a sponsor of the podcast. But
with that being said, she's not paying to be here today.
She's not sponsoring this episode. She's just here to talk
about DSCR loans. So With that being said, Chailey, why
don't we start with who this loan is for? I imagine
that not everybody is a perfect fit for a DSCR loan,
(02:33):
So who is this loan? For sure?
Speaker 2 (02:35):
There could be a few instances where I think an
investor is going to benefit most by a debt service
coverage ratio product. So first would be those individuals that
maybe have maxed out or exhausted those golden tickets. If
you remember, we call Ridgelanding calls Fanny Freddilan's golden tickets
highest leverage, lowest interest rate. There are ten of these
per qualified individual So for those investors that have maxed
(02:59):
those out, they've already exhausted the ten. Then they typically
will pivot into or organically evolve into the DSCR. Those
rules and rags about how many finance properties one individual
can hold is removed when we get into the non
QM space, which is where DSCR lives. The other individuals
(03:20):
are going to be those that cannot show the vials
of blood DNA samples necessary to qualify for those Fanny
Freddy loans. So let's say that you've got a self
employed individual or someone that's just recently become self employed.
There could be lots of different nuanced reasons to this.
But if you cannot fit into the Fanny Freddy underwriting
guideline box via debt to income ratio, maybe some credit issues,
(03:44):
whether it be the score or recent drug stuff that
may have come up, or assets down payment and reserve requirements,
they're a lot looser on the DSCR loan product.
Speaker 1 (03:57):
All right, let's talk about what a bar or actually
needs or like, what you're looking for in a loan application.
Speaker 2 (04:05):
Okay, so let's talk about the like the income piece.
We're not looking for any kind of ordinary income documentation zero,
so there'll be no pay stubs, no tax returns, no nothing. Again,
the product is going to base the qualification off of
the gross rents of the subject property. Okay, I'll come
back to that in a minute. Next in the credit department,
(04:26):
so there's not going to be hard and fast minimum
credit scores the way you would find with a Fanny Freddy.
You know, we've got six fifty credit scores getting approved
for DSCR loans. They're probably going to take a hit
in the interest rate department if you're under certain thresholds.
But six point fifty would probably be the threshold, I
would say, or the minimum that an individual needs to
(04:47):
come with to qualify. And then on the asset side,
you've got to have your you know, twenty percent down.
I'm starting to find that there may be some loosening
of the purse strings. There's been a few announcement recent
or announcements recently, nothing official, but we may start seeing
eighty five percent loan two value on DSCR purchases, so
(05:09):
be on the lookout for that. But so the sourced
and seasoned down payment is a lot less gratuitous when
we're talking about this versus the Fanny Freddy. You only
probably need to show in some cases a week's worth
of seasoning for a down payment versus the two months
that would be required for a conventional loan. And then
(05:29):
the reserve requirement also is a lot less invasive. Depending
on the transaction, you may only need to show six
to twelve months PTI of the subject property only. And
for those that just in comparison, know what the reserve
requirement for Fanny Freddie is. They take the sum of
all investment properties owned and unpaid balances and come up
(05:51):
with a kind of a complicated formula, So a lot
less regulation, a lot less paper pushing with the all
in one or excuse me, with the DSCR loans.
Speaker 1 (05:58):
So the big thing is, it's just the purchase price
and the rent price. That's really what the lender cares about.
Speaker 2 (06:06):
Yeah, the big thing is is really just making sure
that we get that one point oh or greater debt service.
And let me just take a minute and define that
and give an easy math example. So remember we're taking
gross rents and we're dividing it by the PITI principal interest,
tax and insurance HA if it applies. So the easy
math example I give most often is if the gross
rents were one thousand dollars a month and the PITI
(06:28):
was one thousand dollars a month, we're going to get
a one point oh or greater DSCR. We have products
on our DSCR line that will let us go to
as low as point seventy five on the DSCR calculation.
So for those that want to hear the math, that
would mean that the rents were seven hundred and fifty
and the PITI was a thousand. Those loans can get done,
we can do them, but be prepared to have a
(06:50):
nice big hit to the interest rate. More often than not,
most people fall in the one point oh and greater
and then the reverse. I may comment, if you have
a DSCR that's one two five and above, you can
expect a slightly improved rate versus the higher rate at
that point seventy five too point nine to nine?
Speaker 1 (07:08):
How does it work out with figuring out what the
rent's going to be? So say someone buys a property
for one hundred thousand dollars and it's going to rent
for one thousand a month, how does how do you
figure out what the rent is going to be before
a tenant is in there?
Speaker 2 (07:24):
Great question? So we are going to glean the income
using the appraisal of an investment property. If there's a lease,
if you if you're on a purchase transaction, if you
get lucky enough that there's a tenant in there, we
will use the lease. But to your point, I think Dan,
more often than not they won't be pre rented, so
we will get the appraisal. And an appraisal for an
investment property comes with two additional forms. The one that's
(07:47):
most important is called a ten oh seven. That's just
the number at the bottom of the page. These are
the rental income comps. So the appraiser is going to
go out and find like kind properties you know, bedroom,
bathroom count, square footage age, et cetera, within ideally like
a one mile radius, and that our tenant occupied. That's
public records. So they're going to take all that added
(08:07):
together and divide by the number of comps they used,
and that's the number that we're going to use as
the gross rent to divide against the piit I. Now
there is a little nuance here. If this is a
short term rental, then obviously knowing that in advance, we
have to get some more data pulled. A lot of times,
air DNA is the software that's used to establish rental income,
(08:30):
especially when it is a short term rental. Otherwise, just
a straight residential investment appraisal is what we'll use.
Speaker 1 (08:38):
So you can use this for regular rentals, short term rentals,
what about mid term rentals?
Speaker 2 (08:44):
Absolutely same thing. Ideally you have data tape or rent
rolls when they're the short term or the midterm that
we can use to quantify whatever the income is going
to be. Otherwise, the air DNA site is largely what
will be used in underwriting for establishing the baseline.
Speaker 1 (09:00):
And what about type of property? So, I mean, obviously
single family is what we've mainly been talking about. Well
what about duplex's, triplex's four plex? Would would they be eligible?
Speaker 2 (09:12):
Absolutely? All residential properties are going to be eligible, so
up to four units, even things like non warrantable condos
or condo tells. Those kind of atypical property types that
you might find difficult with a Fanny Freddy is absolutely
acceptable on a DSCR basis, So that might be another
reason that someone would look at this product versus a conventional.
Speaker 1 (09:34):
So walk me through the process of actually getting approved,
because it seems like you're pulling the credit and then
you're ordering the appraisal, but you're not looking at tax
returns like that. There's just a lot less paperwork involved.
So what's the timeframe from the time that somebody finds
(09:55):
a deal to when you can close on it?
Speaker 2 (09:58):
You know, we set the expectation about thirty to forty
five days just to give us that room, you know,
the extra buffer there can be for the appraisal piece. Right.
The appraisal turntime is really one part of the big
process that we don't have as much control over So
if an appraisal turntime is five days, then the thirty
day expectation is relevant. If it bleeds into seven ten days,
(10:20):
then expect a little bit longer. But thirty forty five
days is usually where we set the mark.
Speaker 1 (10:24):
So really, the only thing that you would need from
the borrower is they're solid security number, right like you're
pulling the credit. But everything else is pretty much they
taken care of it. On your end, it's a lot less.
Speaker 2 (10:42):
Let's just say that we're still going to need things
like drivers license, bank statements to show where the cash
to close is coming from. There's still some paper pushing
and d documentation that is to be received, but definitely
nothing like especially for those that have lots of properties
or maybe those that have multiple tax returns to provide
It is a fraction of the work in the upfront
(11:03):
pre quall that Fanny Freddy Loan would be.
Speaker 1 (11:06):
Now, talk to me about some of the interest rates, Like,
so the rates I assume are going to be higher
just because you're not going through all the documentation, is
that right.
Speaker 2 (11:18):
Well, it's less skin in the game, so yes, I mean,
really about the documentation, right, we're not supplying any of that,
so the risk is higher, in which case the rate
is going to be higher. But I think that people
are surprised by the level of increase between a Fanny
Freddy and a DSCR loan. And it's really important to
remind everybody about those l LPAs that you and I
(11:39):
talk about almost every time we get on one of these,
that stands for Loan level price adjustment. Quick refresher everybody
that is a positive or a negative number that associates
with the loan characteristics. Okay, I won't go down that
rabbit hole. I'll just kind of cut it short and
say that if the transaction details are saying apples to
(12:01):
apples conventional versus DSCR, then you can expect probably a
half to three quarters of percent higher in rate on
a DSCR than you would find on a Fanny Freddy deal.
Speaker 1 (12:11):
Okay, all right, so there's a little bit higher rate,
but you know that's not going to significantly change your payment.
Speaker 2 (12:20):
Depending on loan size, right, it really probably won't. Maybe
it could be five bucks, it could be twenty bucks.
It's probably not significant, you know. And as we're talking
about interest rate, it's worth the mention that even with
that higher interest rate a half or three quarters whatever,
it ends up being reminder to us investors, we get
that benefit on our schedule ecome tax time, so it's
(12:41):
not dollar for dollar a course, but you're going to
have some secondary incentive there.
Speaker 1 (12:46):
What about pre payment penalties? Is there a certain amount
of time you have to keep the loan?
Speaker 2 (12:53):
Very good question, and yes, depending on state you usually laws.
There's certain states that will preclude or prohibit certain pre
payment penalties which will really change the interest rate. But
most DSCR loans come standard with a three year prepayment
penalty thirty six months. The structure of these prepayment penalty
(13:14):
penalties can change, but overall you should expect to hold
the DSCR loan for about three years before refinancing without
a penalty would be viable. Now, the individual always has
the option to buy the prepay down or out, or
conversely they can increase the prepay and reduce the interest
rate going the other way too.
Speaker 1 (13:35):
Okay, And the last question is if someone has a
property with equity in it and they want to cash
out with a DSCR loan, is that possible? Can you
do a cash out.
Speaker 2 (13:47):
REFI Absolutely, we're seeing lots and lots of those these days,
and in fact I will tell you coming very very soon.
I want to say as early as middle July, we
will have eighty percent loan to value on a cash
out refile of a DSCR, which is greater than it
has been in the past. We've been capped at seventy five,
and it's certainly higher than what Fanny Freddie will allow for.
(14:08):
So you'll have a little bit more access and leverage
opportunity to eighty percent single family to four units. The
number of doors up to four in residential is not
going to deter the LTV, but eighty percent is coming.
So pretty excited. We'll be making some announcements about officially
here in the coming weeks.
Speaker 1 (14:26):
Awesome, Well, Chayley, if anyone wants to talk to you
more about this, see if this is a good option
for them. What's the best way for someone to reach
out to you.
Speaker 2 (14:34):
There are so many I'm going to rattle them off
for everybody, So you've got our email info at Ridge
Lendinggroup dot com, toll free eight five five seven four
seven four three four three. The easy way to remember
is eight five five seventy four Ridge and then of
course our website www. Dot ridgelandinggroup dot com.
Speaker 1 (14:54):
Thank you so much for checking out this bonus episode.
I'll be back with a new interview on Tuesday. My
name is Dan Lane and this has been the Rental
Income Podcast
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