Why this scenario matters
DSCR lending decisions often hinge on small assumption changes. A pre-screen model reduces wasted applications and helps you negotiate from a stronger position.
Baseline modeling framework
- Start with conservative effective rent, not optimistic pro-forma rent.
- Include vacancy, management, maintenance, tax, insurance, and HOA when applicable.
- Run at least three rate scenarios and two vacancy scenarios.
- Verify lender overlays before committing capital.
Practical checklist
- Export your assumptions before every lender call.
- Keep a stress-case DSCR threshold of at least 1.15 for downside resilience.
- Compare payment structure, not just headline rate.
Related guides
FAQ
Q: When does paying points make sense? A: If you plan to hold the loan past the break-even point (typically 4–7 years), paying points reduces your total cost. For short holds, keep the cash.
Q: How much is each point worth? A: One point costs 1% of the loan amount and typically reduces your rate by 0.125–0.25%. Calculate your specific break-even.
Q: Are points tax-deductible? A: Points on investment property loans are generally amortized over the loan term, not deducted immediately. Consult your tax advisor for specifics.
Next Step
Use the DSCR Calculator to run points vs rate scenarios and find your personal break-even timeline.