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DSCR Loan Interest Rates
Last updated: March 18, 2025
Current DSCR Loan Interest Rates
The 5-Year US Treasury, currently at 4.065% as of this update and down 0.55% from 2025 highs, serves as a critical pricing benchmark ("risk-free rate") for DSCR loan interest rates. The yield on the 5-Year US Treasury has been and will likely continue to be volatile until inflation is firmly under control and the market better understands the White House's economic policy and the Federal Reserve’s rate-cutting policy. Given elevated uncertainty, weakening consumer sentiment and renewed inflation concerns we expect DSCR loan interest rates to remain elevated and volatile in the 6.5% to 8% range through 2025.
White House policy including tariffs, DOGE federal cost cutting, and immigration have resulted in a deteriorating economic outlook which has the potential to bring "stagflation" -- a combination of slow economic growth or recession and elevated inflation. This will challenge the Federal Reserve and potentially limit their ability to reduce interest rates in the near term.
Key takeaways:
We view current DSCR loan interest rates as fairly priced and volatile.
We view DSCR loans as attractive relative to other rental property financing options (bank loan, line of credit, conventional investment property loan) because the capital markets for DSCR loans remains healthy. For more on this, learn about DSCR loan pros and cons.
We are advising our clients to refinance out of hard money fix and flip loans while the 5 Yr US Treasury is near 4% as we see an elevated risk that interest rates will rise over the course of 2025.
We are advising our clients consider selecting a lower prepayment penalty in order to opportunistically refinance if rates decline in the next few years.
The US Treasury yield curve and declining consumer sentiment surveys is indicating an elevated risk of recession coupled with an elevated expectation of inflation, a combination known as "stagflation" which would keep DSCR loan rates elevated for the foreseeable future.
How to calculate DSCR Loan Interest Rate
DSCR loan interest rates are calculated by adding the 5 Year US Treasury ("risk-free rate")+ Credit Spread ("risk premium").
- 5 Year US Treasury ("risk free rate") = 4.065% (as of the 'Last updated' date at the top of the page). This component is constantly changing based on bond market transactions.
- Credit Spread ("risk premium") = typically 2.5% to 4.5% depending on several factors that are specific to borrower, deal scenario, lender and market risk appetite.
Factors affecting credit spread
- Credit score -- higher credit score results in lower credit spread
- LTV -- lower LTV results in lower credit spread
- DSCR -- higher DSCR results in lower credit spread
- Property type -- lower unit count results in lower credit spread
- Property location -- non-judicial states and low-default markets result in lower credit spread
- Prepayment penalty -- higher prepayment penalty results in lower credit spread
- Institutional credit investor demand -- higher demand and competition for origination volume results in lower credit spread
Note: index rates are based on 30 year fixed rate, fully amortizing, 1.1 DSCR or higher, 80% LTV on purchase or 75% LTV on cash out refi, 720+ credit score and a 5-4-3-2-1 prepayment penalty. Interest rates are an approximation based on best available nationwide private lender data for competitive rates. DSCR loan interest rates are lower at lower LTV and higher credit score.
Keeping track of DSCR loan interest rates used to mean filling out forms, calling and emailing multiple DSCR lenders. Now you can get instant DSCR loan quotes, and know that you are getting the lowest rate, lowest fees, and highest leverage, every time.
In line with our mission to be the most transparent and competitive DSCR lender for real estate investors of all experience levels, we are pleased to introduce the DSCR Loan Interest Rates Index, an index of prevailing DSCR loan interest rates for 30 year fixed rate fully amortizing DSCR Loans.
DSCR Loan Interest Rates Today
Current DSCR loan interest rates are displayed in the chart above. Rates are sensitive to several factors, so it's best to get a personalized instant quote.
DSCR loan interest rates today are based on the 5-Year US Treasury plus a credit spread. As you will learn below, the credit spread is deal-, borrower-, and lender-specific. However, at OfferMarket, we consistently price your credit spread in the 2.25% to 3.25% range for the vast majority of scenarios. As noted above, the credit spread depends on several factors including credit score, LTV, DSCR, property type, property location, prepayment penalty, and institutional credit investor demand. These variables all play a critical role in determining the overall DSCR loan interest rates you will receive.
DSCR loan interest rate quoting models weigh the following factors:
Borrower credit score
The higher your credit score, the lower your rate. Many rental property investors do not realize how sensitive DSCR loan quoting is to credit score.
| Credit Score | Interest Rate |
|---|---|
| 760+ | +0.0% |
| 740 - 759 | +0.05% |
| 720 - 739 | +0.1% |
| 700 - 719 | +0.15% |
| 680 - 699 | +0.25% |
| 660 - 679 | +0.50% |
But credit score doesn't just affect your rate, it also impacts the loan amount (LTV) you qualify for.
| Credit Score | LTV (purchase) | LTV (cash out refi) |
|---|---|---|
| 720+ | 80% | 75% |
| 700 - 719 | 75% | 70% |
| 680 - 699 | 70% | 65% |
| 660 - 679 | 65% | 65% |
Some of the capital providers that buy our loans will require a DSCR of 1.2 (instead of 1.0 or 1.1) for borrowers whose credit score is below 720. To see how that can affect your loan amount, use our top-ranked DSCR calculator.
Takeaways:
- protect and optimize your credit score
- stop using credit cards for your rehab projects, instead use vendors with net terms who can be paid via fix and flip loan draws
- learn about the tri merge credit report
Borrower experience
Some DSCR lenders do not work with 0 experience first-time investors. Among lenders that do work with new investors, it's not uncommon for max LTV to be reduced by 5% and interest rates to be slightly higher (0.1% - 0.2%).
While it's nice to be rewarded for experience, it can also be frustrating to be penalized for a lack of experience. Our DSCR loan program is designed to provide investors of all experience levels with the most competitive terms.
LTV
The higher your LTV, the higher your interest rate. This is because higher leverage means higher default risk. Lenders and credit investors are compensated for this higher risk by offering a higher interest rate.
| LTV | Interest Rate |
|---|---|
| 80 | +0.4% |
| 75 | +0.3% |
| 70 | +0.2% |
| 65 | +0.1% |
| 60 | +0.0% |
| Under 60 | +0.0% |
Loan amount
You may be surprised to learn that DSCR interest rates are affected by your loan amount. Private lenders want a higher interest rate to make it worth issuing a low value loan.
| Loan Amount | Interest Rate |
|---|---|
| $150,000+ | +0.0% |
| $125,000 - $150,000 | +0.1% |
| $100,000 - $125,000 | +0.2% |
| $75,000 - $100,000 | +0.3% |
| $50,000 - $75,000 | +0.4% |
| Under $50,000 | +0.5% |
Prepayment Penalty
The longer the prepayment penalty period, and higher the prepayment penalty, the lower your interest rate.
| Prepayment Penalty | Interest Rate |
|---|---|
| 5-5-5-5-5 | -0.0625% |
| 5-4-3-2-1 | +0.0% |
| 4-3-2-1 | +0.125% |
| 3-2-1 | +0.1875% |
| 2-1 | +0.2125% |
| 3-0 | +0.4% |
| 1-0 | +0.2375% |
| 0-0 (no prepayment penalty) | +0.28125% |
Learn more about prepayment penalty options for DSCR loans.
Risk and Demand
As perceived risk and fear of inflation increases, DSCR loan interest rates increase. When lenders and institutional fixed income investors believe there is a higher risk of default due to housing market and economic weakness, a higher interest rate will be required in order to incentivize acceptance of that risk.
Interest rates on DSCR loans
DSCR Loan interest rates:
- are correlated to the 30 year conventional fixed rate mortgage
- are affected by strength of DSCR (cash flow of your rental property) -- try our DSCR Calculator
- are affected by your credit score, which also can limit your loan amount (loan to value, "LTV")
- increase as LTV increases
- are priced at a premium to the 30 Year Conventional Fixed Rate Mortgage rate, and this "spread" varies based on the health of the fixed income markets
- may be affected by your real estate investing experience
DSCR Origination Fees and Their Impact on DSCR Loan Interest Rates
Otherwise known as “points,” origination fees are typically a percentage of the loan amount. So if your private lender charges 2 points and your loan amount is $200,000, your origination fee would be $4,000. Please note that private lenders may also charge additional fees, including an “underwriting fee,” “processing fee,” and “servicing fee.” So, do not be fooled by a low origination fee—make sure you understand your lender’s fees and compare terms from multiple lenders. To get a clear picture of DSCR loan interest rates, you can get DSCR loan quotes in 2 minutes or less.
DSCR Calculator
Use our handy DSCR Calculator to determine DSCR for your next rental property purchase or refinance.
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DSCR Loan Interest Rate Chart
Chart by TradingView
