What are the risks of a DSCR loan?
Some risks of DSCR loans include: * **Higher interest rates:** Potentially leading to higher borrowing costs[4]. * **Larger down payment:** May require more upfront capital[4]. * **Risk of default:** If the property's income declines, you may struggle to make loan payments[4]. * **Prepayment penalties:** May incur penalties if you pay off the loan early[9].
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Related Questions
What is a DSCR loan?
A DSCR loan, or Debt Service Coverage Ratio loan, is a type of mortgage designed for real estate investors. Unlike tradi...
How is the DSCR calculated?
The DSCR is calculated by dividing the property's net operating income (NOI) by its annual debt service (total principal...
What is a good DSCR ratio?
Lenders typically prefer a DSCR of 1.25 or higher, indicating the property generates 25% more income than needed for deb...