The Seven Main DSCR Repayment Options
1. 30-Year Fixed
Standard 360-month amortization with a fixed interest rate. Payment stays the same for the entire loan life.
- Pros:
- Payment certainty for 30 years. No rate-adjustment risk. Easy to model long-term cash flow.
- Cons:
- Highest origination rate of the options. Slowest equity build in early years.
- Typical rate (May 2026):
- 7.00–8.50% on standard files
- Best for:
- Buy-and-hold investors with 7+ year horizons. Anyone who values payment certainty over rate optimization.
2. 5/1 ARM (Five-Year Fixed, Then Annual Adjustments)
Fixed rate for the first 5 years, then adjusts annually based on a margin over an index (typically SOFR + 3.00–4.00%). Has lifetime and periodic caps (e.g., 2/2/5).
- Pros:
- Starting rate ~0.250–0.500% below 30-yr fixed. Saves real money if you refi or sell within 5 years.
- Cons:
- Rate uncertainty after year 5. Caps protect against worst-case but not against bad-case.
- Typical rate:
- 6.50–8.00% (initial 5-year rate)
- Best for:
- Investors with clear exit/refi plan within 4–5 years. BRRRR strategies. Properties in markets you expect to refi out of after stabilization.
3. 7/1 ARM (Seven-Year Fixed)
Same structure as 5/1 ARM but with a 7-year initial fixed period. Adjusts annually thereafter.
- Pros:
- ~2 extra years of payment certainty vs 5/1, with modest rate premium (typically 0.125% above 5/1).
- Cons:
- Less common than 5/1; not every lender offers.
- Typical rate:
- 6.625–8.125%
- Best for:
- Investors with a 5–7 year hold window who want some buffer but don't need full 10 years of certainty.
4. 10/6 ARM (Ten-Year Fixed, Then Six-Month Adjustments)
Fixed for 10 years, then adjusts every 6 months. Most common longer-duration ARM in DSCR.
- Pros:
- 10 years of payment certainty at a rate typically 0.125–0.250% below 30-yr fixed.
- Cons:
- Smaller rate savings vs 30-yr fixed than 5/1 ARM offers. Adjustment frequency (every 6 months after year 10) is faster.
- Typical rate:
- 6.75–8.25%
- Best for:
- Investors with 8–10 year holds who want most of the rate benefit of an ARM without the year-5 adjustment risk.
5. 5-Year Interest-Only (with 30-Year Amortization)
Pay only interest for the first 5 years. After year 5, the loan re-amortizes over the remaining 25 years — payment jumps materially.
- Pros:
- 30–40% lower monthly payment during the IO period vs fully-amortizing. Maximizes cash flow on stabilizing properties.
- Cons:
- Zero principal paydown during IO. Payment shock at year 6 when amortization kicks in. Net rate is 0.125–0.250% higher.
- Typical rate:
- 7.125–8.625%
- Best for:
- BRRRR-style properties expected to refi or sell within 5 years. Properties in growth markets where you're banking on appreciation rather than principal paydown.
6. 10-Year Interest-Only
10 years of interest-only payments, then 20 years amortizing. Useful for investors who want extended cash-flow optimization.
- Pros:
- Twice the IO window of 5-year IO. Longer cash-flow tailwind during the high-leverage early years.
- Cons:
- Larger payment shock at year 11 (amortizing over only 20 years vs 25). Rate premium 0.125–0.250% over 5-year IO.
- Typical rate:
- 7.25–8.75%
- Best for:
- Long-term holders prioritizing cash flow over equity build. Investors planning to refi at year 8–10.
7. 40-Year Amortization (vs Standard 30-Year)
Standard amortization stretched over 480 months instead of 360. Reduces monthly payment ~10–15% vs 30-year fixed at the same rate. Some lenders pair this with a 10-year IO period (10 IO + 30 amortizing).
- Pros:
- Lower monthly payment helps DSCR qualification on tight files. Improves cash flow.
- Cons:
- More total interest paid over the loan life. Equity builds slower than 30-yr. Rate premium 0.125% over comparable 30-yr.
- Typical rate:
- 7.125–8.625%
- Best for:
- Files where DSCR is borderline (1.00–1.10) and you need the lower payment to qualify or unlock better LTV. Long-term holders.
Side-by-Side Rate & Payment Comparison
Same loan: $300,000 amount, May 2026 standard-tier pricing, 700 FICO, 75% LTV, 1.20 DSCR.
| Option | Rate | Monthly Payment | Total Interest (30 yr) | Year-1 Cash Flow vs SFR Rent of $2,600 |
|---|---|---|---|---|
| 30-Year Fixed | 7.500% | $2,098 | $455,000 | +$502 (after $475 TI) |
| 5/1 ARM | 7.000% | $1,996 | ~$418,000 (if held 30) | +$604 |
| 7/1 ARM | 7.125% | $2,021 | ~$427,000 | +$579 |
| 10/6 ARM | 7.250% | $2,047 | ~$436,000 | +$553 |
| 5-Yr IO (then 30 amort) | 7.750% | $1,938 (IO) / $2,265 (amort) | $525,000 (longer term) | +$662 during IO |
| 40-Year Amortization | 7.625% | $1,991 | $655,000 | +$609 |
Not Sure Which Repayment Option Fits Your File?
We model 4-5 structures against your specific scenario, show you side-by-side, and let you pick. No additional cost on the quote.
Get My Structure Analysis →How to Pick: The Decision Framework
Three questions, in order:
Question 1: What's Your Hold Horizon?
- Less than 5 years: 5/1 ARM or 5-year IO. You'll exit (refi or sell) before adjustment risk hits.
- 5–10 years: 7/1 ARM, 10/6 ARM, or 10-year IO. Matches the certainty window to your hold.
- 10+ years: 30-year fixed. Lock the rate, ignore the noise, build equity.
Question 2: How Tight Is Your DSCR?
- DSCR > 1.25 (strong): Any structure works. Optimize for total interest or payment certainty.
- DSCR 1.00–1.24 (standard): Consider 40-year amortization or IO to improve qualifying DSCR and unlock better LTV.
- DSCR < 1.00: No-ratio program required. IO or 40-yr can help reach 1.0 in some lender programs.
Question 3: What's Your View on Rates?
- Expect rates to fall: Take an ARM. You'll refi to lower rate before adjustment hits.
- Expect rates flat: 30-yr fixed offers slight premium but full certainty. Reasonable choice.
- Expect rates to rise: 30-yr fixed locks current rate. Strongest case for fixed.
(Caveat: rate forecasting is unreliable. Most experienced investors anchor to hold horizon and DSCR strength, not rate outlook.)
Prepayment Penalties Across Structures
Most DSCR loans carry a prepayment penalty regardless of repayment structure. Standard structure is 5-year declining (5-4-3-2-1) — meaning you pay 5% of remaining balance if you refi/sell in year 1, 4% in year 2, etc. Some programs offer:
- 3-year prepay (3-2-1): +0.250% rate, exit cleanly after year 3
- 1-year prepay: +0.375% rate, exit cleanly after year 1
- No prepay: +0.500–0.750% rate, exit anytime
If you're taking a 5/1 ARM with the plan to refi at year 5, make sure the prepay penalty ends before that point. Most 5-year ARMs come with a 5-year prepay by default — perfect alignment. Don't accept a 7-year prepay on a 5-year ARM unless you've thought through the implications.
Full prepayment penalty guide →
Frequently Asked Questions
30-year fixed (most common), 5/1 ARM, 7/1 ARM, 10/6 ARM, 5-year IO, 10-year IO, and 40-year amortization. Choice depends on hold horizon, cash flow needs, and rate outlook.
Both. ~70% of DSCR origination is 30-year fixed. ARMs (5/1, 7/1, 10/6) make up the rest. ARMs price 0.250–0.500% below fixed.
Yes. 5-year IO and 10-year IO are standard. IO payments are 30–40% lower than fully-amortizing during the IO period. After IO, payment jumps as the loan re-amortizes.
Fixed for 7+ year holds and payment certainty. ARM for shorter holds (refi/sell before the fixed period ends).
Yes — most DSCR refinances do exactly this. Common pattern: start with 5-year IO during BRRRR stabilization, refi to 30-year fixed after year 3-5 once cash flow is mature.