Yes — many DSCR loans include prepayment penalties. Investors accept PPP in exchange for better rates — and plan exits and refinances around the window.
Prepayment penalties (PPP) compensate investors when loans pay off early — before they earn expected yield. On DSCR, accepting a PPP often improves your rate, which is why most investors include them by default.
Common structures run 3–5 years with declining percentages — such as 5-4-3-2-1 or 3-2-1. Soft vs. hard prepay rules determine whether selling without penalty is allowed while refinancing still triggers a fee.
PPP terms are investor-specific — confirm exact language before you lock.
Know the schedule before you plan a sale or refinance.
Five-year window with 5% penalty in year one stepping down each year. Common on longer-hold rentals.
Shorter three-year window — less rate benefit than five-year but more exit flexibility.
May allow payoff on bona fide sale without penalty. Refinance within the window often still triggers a fee.
Penalty applies on any early payoff — sale or refinance. Usually paired with the best rate tiers.
Some programs penalize curtailments above a threshold percentage — read the note carefully.
Occasionally available at a higher rate — useful for short hold periods or uncertain exit timing.
Match PPP length to how long you realistically hold the asset.
A 5-year PPP often makes sense — you get better rate and do not plan to refinance soon anyway.
Shorter PPP or no PPP may cost more in rate but avoids a penalty when you sell after renovation.
Model whether waiting past the PPP window beats paying the penalty plus taking a new rate.
Align PPP across properties so you are not trapped refinancing one loan while others are still in penalty windows.
An Indiana investor in year two of a 5-4-3-2-1 PPP faces a 4% penalty on the remaining balance to refinance early. If the new rate saves $200/month, we calculate how many months of savings it takes to break even against the penalty — and whether waiting one more year is smarter.
Never assume PPP language is identical across investors. We confirm soft vs. hard and sale exceptions before you lock.
Related DSCR guides and investor resources from Ryan & Steve.
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Yes — many DSCR loans include prepayment penalties (PPP). Common structures run 3–5 years with declining percentages (such as 5-4-3-2-1 or 3-2-1). PPP length often trades off against rate.
Hard prepay charges a penalty on any payoff — sale or refinance. Soft prepay may allow payoff on a bona fide sale without penalty but still charge on refinance. Confirm your investor's definition before you lock.
Typically when you pay off, refinance, or sell within the PPP window — depending on soft vs. hard structure. Partial paydowns above a threshold can also trigger on some programs.
Longer PPP usually improves rate — good if you plan to hold. Shorter PPP costs more in rate but preserves flexibility if you expect to sell or refinance soon.
Ryan & Steve will compare PPP options against rate and map your hold or refinance timeline before you lock.