DSCR Loan: Can I Buy Down My Rate?


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DSCR Loan: Can I Buy Down My Rate?

Many investors ask whether or not they can buy down their rate when using a DSCR loan. The answer is yes! This is one of the many options available for investors who are searching for a DSCR loan. It is important to find the best one for your property to not only create greater cash flow, but create wealth as well. While rents are increasing, they are thankfully not increasing very fast. However, rates are still high and are falling between 7 and 8. These are the times when you really need to work your numbers and products in order to find the right DSCR loan for your rental property.  

Are you above the break even point for DSCR ratios?

A DSCR loan has always been a 30 year product, meaning that it is amortized over 30 years. However, there are other options out there that will typically give you the benefit of qualifying. Here at The Cash Flow Company, we typically see people who are just below the break even point on DSCR ratios. Just to clarify, the break even point on DSCR ratios is normally 1 or 1.1 depending on the lender. 

How do you change the numbers in your favor?

Many investors are wondering how they can change their numbers even when rents, taxes, and insurance are not going to change. In order to make an impact on your numbers you are going to have to change your interest rate, look at interest only loans, or find a 40 year product. By looking outside of the typical 30 year box, you will be able to find a number that fits your property. 

Let’s look at buying down your rate.

Buying down your rate means that you are paying an extra point, which is 1% of your loan to the lender in order to get a better rate. A better rate would be a better payment, and which would allow you to qualify.

Loan amount $250K
Net Rent $1,725
Pay down interest (1%)  7.35%
Monthly payment  $1,722
Break even point (Rents – Monthly payment) $3 under

While there is not much cash flow right now, it does allow investors to get into the property. It also creates an opportunity to build an asset. 

Set yourself up for success.

There is no reason to get into real estate investing unless you are creating wealth by creating cash flow. Just to clarify, creating wealth is setting yourself up for long term success. On the other hand, cash flow is what you are creating right now. It is important that you not only look at making the right moves now, but also understand how everything will line up for the future. For example, a property that was purchased for $25K 20 years ago is now worth $400K. There is a lot of money to be made in real estate investing. Set yourself up for success by going through the numbers and focusing on finding the best product. 

Start looking for the best product for you!

Now is the time to look into different products to see which is best for you and your property. By buying down your rate you will have the opportunity to create the cash flow you need to succeed. Here at The Cash Flow Company we want to help you find the best product for you! Contact us today to walk through the numbers.

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