Leave early without the 5% hit.
Most DSCR lenders charge 5-4-3-2-1: 5% of the balance if you pay off in year one, stepping down a point a year. Ours drops to 1% after year one, or starts at 1%. Or choose no prepayment penalty at all.
Penalty if you pay off in…
| Structure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Industry standard · 5-4-3-2-1 | 5% | 4% | 3% | 2% | 1% |
| YS option 1 · 5-1-1-1-1 | 5% | 1% | 1% | 1% | 1% |
| YS option 2 · 1-1-1-1-1 | 1% | 1% | 1% | 1% | 1% |
| YS no-prepay option | 0% | 0% | 0% | 0% | 0% |
Each structure applies where state law allows; the one on your term sheet is the one that applies to your loan.
On a $500,000 balance.
| Pay off in | Industry 5-4-3-2-1 | YS 5-1-1-1-1 | YS 1-1-1-1-1 | YS no-prepay |
|---|---|---|---|---|
| Year 1 | $25,000 | $25,000 | $5,000 | $0 |
| Year 2 | $20,000 | $5,000 | $5,000 | $0 |
| Year 3 | $15,000 | $5,000 | $5,000 | $0 |
| Year 4 | $10,000 | $5,000 | $5,000 | $0 |
| Year 5 | $5,000 | $5,000 | $5,000 | $0 |
Pick by when you might leave.
Option 1 · 5-1-1-1-1
The same 5% as everyone in year one, then 1% in years two to five. It fits a hold of a year or more where you might still sell or refinance early: leaving in year two costs $5,000 on $500,000, not $20,000.
Option 2 · 1-1-1-1-1
1% in every year, from the first day. It fits a rental you may sell inside a year, a refinance you may redo when rates move, or any exit you cannot time.
No prepayment penalty
Pay the loan off on any day for $0. It can be paired with our no-closing-cost option on DSCR loans. Ask us to price it on your deal next to the other two.
What is 5-4-3-2-1?
A step-down penalty: 5% of the balance if you pay off in year one, 4% in year two, 3% in year three, 2% in year four and 1% in year five, then nothing. It is the most common structure on DSCR loans, which is why the first year is so expensive to leave.
Prepayment penalty questions
What is a 5-4-3-2-1 prepayment penalty?
A step-down penalty on paying a loan off early: 5% of the balance in year one, then 4%, 3%, 2% and 1% in years two to five. On a $500,000 loan, leaving in year one costs $25,000.
Can I pay off a DSCR loan early?
Yes. Any DSCR loan can be paid off early; the prepayment penalty is the cost of doing it. With our 1-1-1-1-1 option it is 1% of the balance in any of the first five years; with the no-prepay option it is nothing.
Is there a DSCR loan with no prepayment penalty?
Yes. We offer a no-prepay option on DSCR loans, and it can be paired with the no-closing-cost option.
What does 5-1-1-1-1 mean?
5% of the balance if you pay off in year one, and 1% in each of years two to five. On $500,000, a year-two payoff costs $5,000 instead of the $20,000 a 5-4-3-2-1 loan charges.
What is a step-down prepayment penalty?
A penalty that falls each year you hold the loan, such as 5-4-3-2-1 or 3-2-1. Ours steps down to 1% after the first year, or is 1% from the start.
Which prepayment option costs least?
It depends on when you expect to leave. If you might sell or refinance in the first year, 1-1-1-1-1 or no prepay; if you will hold at least a year, 5-1-1-1-1. Ask us to price each option on your deal.
Price your DSCR loan with the prepay you want.
Tell us the property and how long you plan to hold it. We price the structures side by side.
*For business-purpose loans on non-owner-occupied investment property only. Not available for personal, family or household purposes. All loans subject to credit approval, underwriting and property eligibility. Rates, leverage and terms are indicative, change without notice, and not all borrowers will qualify; not a commitment to lend. YS Capital Group · NMLS ID 2609746 · Equal Housing Lender.