DSCR Refinance Rates: Current Rate Impact

As a real estate investor, you've faced the frustration of traditional mortgage lending. Banks focus on your W-2 income instead of your property's rental income, debt-to-income ratios that don't account for your investment strategy, and underwriters who don't understand the investor mindset. The good news? There's a better way to finance your rental properties.

DSCR (Debt Service Coverage Ratio) loans represent a shift in investment property financing. These loans evaluate your property's ability to cover its mortgage payment through rental income instead of qualifying you based on personal income. This approach benefits self-employed investors, short-term rental operators, and portfolio builders needing flexible, asset-based financing.

In this guide, we demystify DSCR refinance rates, explain the factors influencing your rate, and show you how theLender's approach can help you secure competitive financing for your rental properties. Whether you want to access equity through a cash-out refinance or secure a better rate on your existing investment property loan, understanding these rates is crucial for maximizing your portfolio's potential.

What is a DSCR Loan?

DSCR loans are simple. If the property's rental income covers or exceeds the mortgage payment, the loan qualifies. This is the foundation of true no income verification loans for real estate investors. The Debt Service Coverage Ratio (DSCR) is calculated using a formula: Gross Rental Income divided by PITIA (Principal, Interest, Taxes, Insurance, and Association fees). If a property generates $2,500 in monthly rent and has a $2,000 mortgage payment, the DSCR would be 1.25 ($2,500 ÷ $2,000 = 1.25).

This methodology is a game-changer for serious investors because it allows you to scale your portfolio without personal debt-to-income ratios. Since our founding, at theLender, we've specialized in this approach, funding over $3 billion in DSCR loans since 2019. Our core philosophy reflects this investor-first approach: "Finance Like an Investor, Not a Homeowner." We evaluate each property as a business asset, focusing on its income-generating potential rather than your personal tax returns or employment history.

What Are Today’s Typical DSCR Refinance Rates?

DSCR refinance rates are dynamic and influenced by market conditions like Treasury yields, Federal Reserve policy, and investor demand for mortgage-backed securities. Like all mortgage products, these rates fluctuate daily based on economic factors and incorporate risk premiums reflecting the specialized nature of investment property lending.

DSCR rates run 1-3 percentage points higher than conventional owner-occupied mortgage rates. This premium reflects the additional flexibility and specialized underwriting these products offer. Your final rate will be personalized based on your property, financial profile, and loan structure. The factors we'll discuss will determine your rate within the available range.

8 Key Factors for Your DSCR Refinance Rate

Understanding how lenders price DSCR loans is essential for securing the best rate. We use a risk-based pricing model where lower perceived risk translates to lower interest rates. Here are the eight factors that influence your DSCR refinance rates:

1. The DSCR

Your property's debt service coverage ratio directly impacts your interest rate. Properties with higher DSCRs (typically 1.25 or above) show stronger cash flow and lower risk, resulting in better pricing. Conversely, properties with DSCRs closer to 1.0 face higher rates due to tighter cash flow margins.

We offer our flagship NONI and NearNONI DSCR programs for properties that don't meet traditional DSCR requirements. These programs provide solutions for investors with lower ratios, strong credit scores, and equity positions.

2. Your Credit Score (FICO)

Credit scores remain a crucial pricing factor in DSCR lending. They are structured in tiers like 760+, 720-759, 680-719, etc. Higher scores demonstrate responsible debt management and result in lower interest rates.

Here's a key differentiator for theLender: we underwrite using the highest mid-FICO score among all borrowers on the loan. This results in better rates and terms, especially for married couples or business partnerships where one borrower has a significantly stronger credit profile.

3. Loan-to-Value (LTV) Ratio

Your loan-to-value ratio significantly impacts your rate. The loan amount divided by the property's appraised value determines the LTV ratio. Lower LTVs indicate more equity, reducing lender risk and resulting in better pricing. We offer up to 85% LTV on purchases, with specific LTV limits for cash-out refinance investment property loans based on your DSCR and credit score.

Investors seeking to maximize leverage while maintaining competitive rates can optimize their loan amount and equity extraction strategy by understanding the LTV breakpoints in our pricing structure.

4. Property and Occupancy Type

Different property types carry varying risk profiles that can affect your rate. We finance single-family rentals (SFR), 2-8 unit multifamily properties, condos, and townhomes, each with its own pricing considerations.

Short-term rentals deserve special mention, as STR financing involves specific pricing adjustments due to the unique nature of vacation rental income streams. Our expertise, including our innovative income calculation methods, allows us to offer more competitive rates than lenders who don't specialize in Airbnb and VRBO loans.

5. Loan Program and Term

The loan program you choose significantly impacts your rate:

• 30-Year Fixed-Rate Loans, which offer stable payments, are our most popular option for long-term hold investors.
• 40-Year Fixed with Interest-Only (I/O) Options provide maximum cash flow flexibility during the interest-only period. However, they may carry different pricing due to the extended amortization and payment structure.
• Adjustable-Rate Mortgages (ARMs) like our 7/6 ARM offer lower initial rates than fixed-rate products. This makes them attractive for investors planning to refinance or sell within the initial fixed period.

6. Loan Amount

Small loans (under $100,000) and jumbo loans (over $766,550 in most areas) have pricing adjustments. Our loan amounts range up to $3.5 million, and our experience with larger loans allows us to offer competitive pricing across the spectrum.

7. Prepayment Penalty (PPP)

Accepting a prepayment penalty, structured as a declining penalty over 2-5 years, can significantly reduce your interest rate for the entire loan term. This option makes sense for investors planning to hold properties long-term, as the rate reduction often outweighs the penalty risk.

A 3-year prepayment penalty might reduce your rate by 0.25-0.50 percentage points, saving thousands in interest over the loan's life.

8. Cash-Out vs. Rate/Term Refinance

The purpose of your refinance affects pricing. A rate/term refinance, where you're changing your interest rate or loan terms without taking cash out, is considered lower risk than a cash-out refinance. Our flexible cash-out options for business purposes provide excellent value for investors looking to access property equity for additional investments or expenses.

How theLender Delivers Best-in-Class Rates and Terms

Understanding rate factors is important, but having a lender who can structure your loan for optimal terms is crucial. TheLender's focus on investment property financing creates real value for our clients.

We Maximize Your Qualifying Income, Especially for STRs

Securing competitive DSCR refinance rates maximizes your qualifying rental income, especially for short-term rental properties, where traditional lenders struggle with income calculations. We've developed three innovative methods for calculating STR income:

• Traditional 1007 Appraisal with STR Rents: Our appraisers are trained to evaluate short-term rental income potential using market data and comparable properties.
• AirDNA Reports: We use 12-month projections from AirDNA with standardized expense factors. This provides a data-driven approach to income verification that many lenders cannot match.
• Alternative STR Market Rental Analysis: Our appraiser-completed form simplifies the process while ensuring accurate income calculations for vacation rental properties.

Our robust rebuttal process means we'll fight to use the highest valid income figure to help you qualify for better loan terms and rates.

Our Investor-First Policies Save You Money

Several key differentiators in our underwriting approach can lead to better terms and easier qualification:

• No Seasoning on Cash-Out Refinance: Access your equity immediately after purchase without waiting periods required by other lenders.
• Flexible Entity Vesting: We work with LLCs, S-Corps, and complex layered ownership structures that accommodate sophisticated investment strategies.
• Seller Concessions: Up to 6% (or 9% on new construction) can be used for closing costs, reducing your out-of-pocket expenses.
• First-Time Investors Welcome: We help new investors start without the experience requirements and hurdles of conventional lenders.

A True Partner: Speed, Expertise, and No Lender Fees

Our streamlined process enables us to close most rental property loans in under 30 days, with a single contact throughout your loan. This efficiency stems from our team's expertise in non-QM mortgages and our technology-driven approach to investor lending.

Most importantly, we offer "NO LENDER FEES" on many products, which is a direct cost savings of thousands of dollars per loan. Combined with our competitive rates, this fee structure makes us the most cost-effective option for serious real estate investors.

DSCR Rates: theLender vs. Alternatives

Choosing the right financing partner means understanding your options. Here's how different lender types compare for investment property financing:

• Traditional banks offer the lowest rates, but they require extensive income documentation and impose strict debt-to-income limits that exclude most active investors. They're designed for owner-occupants, not investment property portfolios.
• Hard Money Lenders offer fast funding at higher costs and short terms. They're great for fix-and-flip projects but impractical for long-term rental property loans.
• theLender offers investors competitive rates that reflect the specialized nature of investment lending, flexible underwriting based on property cash flow, and long-term financing options that support wealth-building strategies.

FAQs

What is a good DSCR refinance rate?

A "good" rate depends on current market conditions and your loan profile. The goal is to secure a rate that maintains strong positive cash flow while accessing the needed capital. As a specialist lender, we ensure you receive the most competitive rate for your scenario, often beating quotes from less experienced lenders.

Are DSCR loan rates higher than conventional mortgages?

Yes, DSCR rates are higher than conventional owner-occupied mortgage rates. This premium reflects the flexibility of qualifying without personal income documentation and the specialized nature of investment property lending. However, they're significantly lower than hard money rates and offer the long-term stability that serious investors need.

Can I get a DSCR loan if my property's DSCR is below 1.0?

Yes, theLender offers programs like our NearNONI product that accommodate DSCRs below 1.0 for borrowers with strong credit scores and substantial equity. Each situation is evaluated individually to find the best solution for your investment goals.

Do I need tax returns for a DSCR refinance with theLender?

No. Our flagship DSCR programs don't require W-2s, tax returns, or paystubs for qualification. We focus on the property's cash flow and your creditworthiness. However, personal guarantees are required on all loans, and we'll need to verify your identity and conduct standard background checks.

Conclusion

DSCR refinance rates include your property's cash flow performance, your credit profile, and your loan structure. Understanding these factors empowers you to optimize your loan terms and maximize your investment returns.

theLender isn't a traditional bank constrained by conventional lending guidelines. We're a specialized lender built by investors, for investors. We understand that your rental income is your qualification, and we have the flexible products, from our NONI programs to theBlanket portfolio loans, and expertise to help you achieve your wealth-building goals. Our focus on investment property financing means we can structure loans that other lenders can't offer.