DSCR LOANS

Simple funding based on your property’s cash flow

DSCR LOANS

A DSCR (Debt Service Coverage Ratio) loan is a type of financing specifically designed for income-producing real estate properties. The DSCR measures the property’s ability to generate enough income to cover its debt payments, calculated by dividing the property’s net operating income (NOI) by its total debt service (principal and interest payments).

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Financial Flexibility

Investment Growth

Summary, a DSCR loan helps income property owners secure financing aligned with their property’s cash flow, promoting sustainable investment and growth.

Regarding tax benefits, borrowers of loans may enjoy:

  • Annual Tax Deductions: Mortgage interest payments on the loan are typically tax-deductible, reducing taxable income.
  • Depreciation Benefits: The property can be depreciated over time, leading to annual deductions that improve cash flow and reduce tax liability.
  • Operational Expense Deductions: Maintenance, insurance, and management costs associated with any type of income producing property are deductible, further lowering taxable income.

How it helps owners of income properties:

Enhanced Loan Approval Chances:

If a property has a high DSCR (typically above 1.25), lenders see it as a lower risk, increasing the likelihood of loan approval.

Favorable Loan Terms:

Higher DSCRs often qualify for better interest rates and loan conditions.

Financial Flexibility:

It provides owners with confidence that the property can sustain mortgage payments even if income fluctuates.

Investment Growth:

By leveraging a DSCR loan, owners can acquire more properties or refinance existing ones, fueling portfolio expansion.

Risk Management:

Ensuring a healthy DSCR helps owners maintain financial stability, especially during market downturns or periods of lower rental income.

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Disclosure: Loan programs are currently not offered in CA, MN, ND, SD, VT, ID, NV, OR, AZ, and UT.

Jerry Patricio

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