Prepayment Penalty (PPP)
A fee charged by the lender if the borrower pays off the loan early (via refinance or sale) within a defined window. DSCR loans typically carry 3- or 5-year step-down PPPs (e.g., 5%/4%/3%/2%/1% by year). 20% of original principal can usually be paid down annually without triggering. See PPP Guide →
Why it matters on a DSCR loan
The prepayment penalty is where investors most often get surprised: a sale or refinance inside the penalty window can wipe out a big chunk of expected profit, so match the PPP term to your realistic exit timeline before locking. BRRRR investors who expect to refinance again or sell within a few years should price shorter or reduced penalty structures, even at a modestly higher rate. Also note the annual paydown allowance — you can usually chip away at principal without triggering the penalty.
Related terms
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DSCR Calculator Get a QuoteReviewed by Arin Baghermian, Broker Owner — NMLS #1220456 · Last reviewed July 2, 2026 · DSCR Capital Partners is a brand of UTM Financial, LLC (NMLS #2591548).