Investment property loans is a broad topic with at least a dozen viable financing options available. Lets explore deeper!

Investment property loans - What options are out there?

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If you're looking to refinance your rental property, you need to know about DSCR loans. DSCR loans are a fast-growing loan type designed for real estate investors, especially those without W2 salaried income, who want an easy and streamlined borrowing experience.

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DSCR loans are typically 30 year fixed rate mortgages where the loan amount and interest rate is determined based on the cash flow of the rental property (DSCR), and your credit score and rental property investing experience.

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DSCR stands for *debt service coverage ratio*, a simple cash flow metric where 1.0 indicates that the rental property operates at breakeven. A DSCR above 1 means the property generates free cash flow, while a DSCR below 1 means the property does not generate enough rent to cover its mortgage payments. Most DSCR loan programs, including ours, currently have a minimum DSCR of 1.1 to qualify for a given loan amount. As LTV (loan-to-value) increases, your DSCR decreases as a result of increased mortgage payment. This means that when your DSCR hits the minimum, that is your maximum LTV. Enough explaining, here's how to visualize the concept: 

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<img load="lazy" src="https://cms.offermarket.us/uploads/DSCR_Minimum_3159f49f73.png" alt="minimum DSCR for refinance">

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Rental property investors refinance their rental properties periodically for the following reasons:

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🏚️ get out of a fix and flip loan</br>
💰get cash out of the property</br>
📉 get a lower interest rate and increase cash flow</br>

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## Can you refinance a DSCR loan

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Yes! You can absolutely refinance a DSCR loan, though you will want to make sure you will not be incurring an expensive prepayment penalty.

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### Prepayment Penalty

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Most DSCR loans carry a prepayment penalty. This means you pay a fee if you pay off the loan early. Most DSCR loan prepayment penalties are 3-2-1 or 5-4-3-2-1 "stepdown" penalties where you pay a declining percent of the outstanding principal loan balance as a penalty each of the 3 or 5 years of the penalty period. 

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For example, let's say you're in year 2 of a new loan with $100,000 remaining balance and a 3-2-1- prepayment penalty and you decide to refinance to pull some cash out using a new DSCR loan. You will need to pay a 2% fee ($2,000) to your lender at settlement when you complete the refi.

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Here's a helpful video that explains the prepayment penalty in more detail:

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<div style="position: relative;width: 100%;overflow: hidden; padding-top: 56.25%;">
<iframe  style="position: absolute;top: 0;left: 0;bottom: 0;right: 0;width: 100%; height: 100%;border: none;" 

src="https://www.youtube.com/watch?v=JNxNmdc5hsw"

title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen>
</iframe>
</div>

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## DSCR cash out refinance

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DSCR cash out refinance is the primary financing strategy used by BRRR method investors. Regardless of whether you buy your rental property with cash or a [fix and flip loan](https://www.offermarket.us/blog/fix-and-flip-loans), once you complete your rehab and it's time to pull cash out or refinance into lower interest rate and a longer term, DSCR loans are the easiest way to complete your project so you can move on to the next project without wasting time and leaving cash trapped in the deal. 

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## DSCR loan cash out refinance calculator

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To calculate your loan amount and understand how the DSCR calculation will impact your refinance, we recommend using our [DSCR Calculator](https://www.offermarket.us/tools/dscr-calculator).

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Here are the inputs that affect your DSCR, and ultimately impact your loan amount:

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### 💸 Rent

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The lower the rent, the lower the DSCR at your target loan amount. We use the lower of actual and market rent so make sure you rent your property for market rent!

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### 💸 Taxes 

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Taxes can really eat into your DSCR. BRRR strategy often protects against high taxes because the property was bought in distressed condition and the tax assessed value is still a lot lower than the value after repairs. Lower taxes, higher DSCR, higher LTV.

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### 🔥 Insurance

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The lower your insurance, the higher your net operating income, the higher your DSCR. Insurance for DSCR loans needs to follow specific guidelines including:

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- Coverage type -- typically DP-3 "Special Form"
- Dwelling coverage -- typically replacement cost value ("RCV")
- General liability -- typically $500,000 per occurrence / $1,000,000 in the aggregate 
- business interruption "loss of rent" -- typically 6 or 12 months of coverage so you get paid even if your property is damaged and your tenants need to move out and stop paying rent

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We recommend shopping for the most cost effective landlord insurance from [OfferMarket Insurance](https://www.offermarket.us/insurance), our in-house insurance agency.

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### ⚡ Utilities

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 If the owner pays utilities, then it will reduce your net operating income, the higher your DSCR. If tenants pay utilities, they will not be counted so ideally your lease will specify that your tenants pay all utilities (i.e. water, electric, gas).

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### 📈 Interest Rate

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Interest rate plays a **major** factor in calculating your DSCR. The higher the interest rate, the higher the mortgage payment, the lower the DSCR, the lower the LTV you qualify for -- (see chart above).

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## How long does a DSCR refi take?

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A DSCR refi typically takes 30 to 45 days, though we can fund in as little as 15 to 20 days as long as you complete your processing items in your [Loan File](https://www.offermarket.us/my/loans) and we have an appraisal report and clear title.

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## DSCR refinance cost

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The cost to refinance your rental property with a DSCR loan will vary based on which lender you choose to work with. 

<br>

<table>
<thead>
  <tr>
    <th></th>
    <th>OfferMarket</th>
    <th>Other DSCR Lenders</th>
  </tr>
</thead>
<tbody>
  <tr>
    <td>Origination points</td>
    <td>0.5 to 2</td>
    <td>2 to 4</td>
  </tr>
  <tr>
    <td>Underwriting fee</td>
    <td>$295 - $495</td>
    <td>$495 - $995</td>
  </tr>
  <tr>
    <td>Legal/doc prep fee</td>
    <td>$695 to $995</td>
    <td>$995</td>
  </tr>
  <tr>
    <td>Appraisal fee</td>
    <td>Market</td>
    <td>Market</td>
  </tr>
  <tr>
    <td>Appraisal review</td>
    <td>$90</td>
    <td>$120 - $175</td>
  </tr>
  <tr>
    <td>Title</td>
    <td>Market</td>
    <td>Market</td>
  </tr>
</tbody>
</table>

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## DSCR loan cash out refinance

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Pulling cash out of your rental property with a DSCR loan can be one of the most practical ways to grow your rental portfolio because the loan term is typically 30 years at a fixed rate that is more attractive than personal or business loans or lines of credit.

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## DSCR Loan Refinance Guidelines

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DSCR guidelines are standardized because most DSCR loans are sold to aggregators who pool DSCR loans into mortgage-backed securitizations. As a result, guidelines are in place to ensure borrowers like you are not taking on too much risk.

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<table>
<thead>
  <tr>
    <th>Guidelines</th>
    <th>Refinance</th>
  </tr>
</thead>
<tbody>
  <tr>
    <td>Minimum As Is Value</td>
    <td>$100,000</td>
  </tr>
  <tr>
    <td>Minimum Loan Amount</td>
    <td>$75,000</td>
  </tr>
  <tr>
    <td>Minimum DSCR</td>
    <td>1.1</td>
  </tr>
  <tr>
    <td>Maximum LTV</td>
    <td>75% (cash out), 80% (rate and term)</td>
  </tr>
  <tr>
    <td>Rural</td>
    <td>No</td>
  </tr>
  <tr>
    <td>Bank Statements</td>
    <td>3 months</td>
  </tr>
  <tr>
    <td>Minimum Credit Score</td>
    <td>660</td>
  </tr>
  <tr>
    <td>Tax Returns, W2</td>
    <td>No</td>
  </tr>
</tbody>
</table>

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## No Seasoning Cash Out Refinance

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Most DSCR lenders require you to own your property for 6 months ("seasoning period") before they will allow you to refinance. While we understand the reasons for seasoning, we have no seasoning requirement as long as there is proof that you added value to the property, even if it's a light cosmetic rehab. No rental property investor wants to wait around to pull cash out and get on with their next deal -- especially not when there are concerns of home value declines and rising interest rates.

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It doesn't matter if you bought the property with cash or a short term loan, there is no seasoning requirement with our [DSCR loan program](https://www.offermarket.us/blog/dscr-loan-program). 

If you're considering a refinance of your rental property with a DSCR loan, this guide is for you.

large_Refinance Rental Property DSCR Loan.png

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Refinance Rental Property DSCR Loan.png

Refinance Rental Property DSCR Loan | OfferMarket

Refinance Rental Property DSCR Loan

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At OfferMarket it's always [Sell My House Fast Day](https://www.offermarket.us/blog/sell-my-house-fast-day) and [We Buy Houses Day](https://www.offermarket.us/blog/we-buy-houses-day). 

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If you need to sell your house fast in Dundalk, we want to be your trusted home sale platform. Let's meet a seller who received multiple competitive offers in just 24 hours and ultimately sold his rental property in 23 days.

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## Tired of being landlord

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John was tired of being a landlord and managing his [rental property in Dundalk, MD](https://www.offermarket.us/listings/861-Jaydee-Ave-Dundalk-MD-21222-USA). 

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Before creating his free listing with OfferMarket, John went the traditional route and listed his property with an agent. After four months on the market and two buyers that fell through because of financing issues, John was understandably very frustrated. He had wasted a lot of time and money -- four months is a long time when you're not collecting rent and you have mortgage payments, utilities and insurance to pay. 

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John just wanted a fast, stress-free sale for a competitive price.

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John decided to end his listing agreement with his agent and sell the house without an agent.

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John's research took him to OfferMarket where he created his free listing and upgraded to our Auto-Pilot managed service. He was attracted to the concept of comparing multiple AS IS offers from verified local buyers. 

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Within 24 hours John received 3 offers from OfferMarket-approved buyers. John compared the offers and happily accepted the best offer:

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- **Offer Price:** $145,000
- **Financing type:** cash
- **Contingencies:** none (AS IS)
- **Cloe by:** 25 days

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John sold his house in 23 days, start-to-finish with OfferMarket.

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## How to sell property fast 

> Short and sweet from the seller: You’re the best. Going to do this again on another property.

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Every seller has a story to tell, read our [Google Reviews](https://www.google.com/search?q=offermarket) to see if selling your house fast with OfferMarket is right for you.

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## Seller resources:

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- [Sell My House Fast Dundalk, MD](https://www.offermarket.us/sell-my-house-fast/dundalk-md)
- [We Buy Houses Dundalk, MD](https://www.offermarket.us/we-buy-houses/dundalk-md)

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## [Create your free listing](https://www.offermarket.us/sell) and compare AS IS offers from verified local buyers

Every seller has a Sell My House Fast story to tell. Meet John, who received 3 offers in 24 hours and sold his house in 23 days.

large_Seller Success Stories Dundalk, MD - MetaImage.jpg

medium_Seller Success Stories Dundalk, MD - MetaImage.jpg

small_Seller Success Stories Dundalk, MD - MetaImage.jpg

thumbnail_Seller Success Stories Dundalk, MD - MetaImage.jpg

Seller Success Stories Dundalk, MD - MetaImage.jpg

Sell My House Fast Success Story Dundalk, MD  - OfferMarket Blog

Sell My House Fast Success Story: John from Dundalk, MD

Grow your real estate investing business with the most competitive and transparent private lender for bridge loans (hard money, fix & flip, rehab, ground up construction), DSCR rental loans.

Private Lender for DSCR Loans and Fix & Flip Loans | OfferMarket

Private Lender for DSCR Loans and Fix & Flip Loans

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The objective of this blog post is to share with you a data driven perspective of [mortgage forbearance](https://www.offermarket.us/real-estate-glossary/mortgage-forbearance) and [foreclosure](https://www.offermarket.us/real-estate-glossary/foreclosure) trends to gauge the health of the U.S. consumer and the housing market.

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## Delinquency Rate on Single-Family Residential Mortgages

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<iframe src="https://fred.stlouisfed.org/graph/graph-landing.php?g=EiAD&width=670&height=475" scrolling="no" frameborder="0" style="overflow:hidden; width:670px; height:525px;" allowTransparency="true" loading="lazy"></iframe>

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Source: Federal Reserve Bank of St. Louis

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## Household Debt To GDP

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<iframe src="https://fred.stlouisfed.org/graph/graph-landing.php?g=E6WH&width=670&height=475" scrolling="no" frameborder="0" style="overflow:hidden; width:670px; height:525px;" allowTransparency="true" loading="lazy"></iframe>

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Source: Federal Reserve Bank of St. Louis

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## Check back soon, we are actively adding to this resource. [Subscribe to our insights and deal flow](https://www.offermarket.us/subscribe/deal-flow).

A data driven perspective of mortgage forbearance and foreclosure trends and the health of the U.S. consumer and housing market.

A Closer Look At Mortgage Forbearance And Foreclosure Data

Delinquency Rate on Single-Family Residential Mortgages

Household Debt To GDP

Check back soon, we are actively adding to this resource. Subscribe to our insights and deal flow.