Financing decisions
How to compare two DSCR loan offers
Put the rate, upfront costs, repayment terms, and your planned exit on the same page. A useful comparison starts with the same property, loan amount, and assumptions.
One loan amount. Two ways to price it.
Assume a $300,000 loan with a 30-year term, fixed interest, monthly principal-and-interest payments, and no early payoff fee under either option. Upfront fees are paid in cash. The examples assume on-time payments with no extra principal payments.
| Item | Option A | Option B |
|---|---|---|
| Loan amount | $300,000 | $300,000 |
| Annual interest rate | 7.00% | 7.50% |
| Upfront lender charge | 2 points ($6,000) | 0 points ($0) |
| Other assumed loan costs | $2,500 | $2,500 |
| Total upfront loan costs | $8,500.00 | $2,500.00 |
| Monthly principal & interest | $1,995.91 | $2,097.64 |
| Prepayment penalty assumed | None | None |
One point is 1% of the loan amount. Points can describe different charges; ask what each fee pays for. Taxes, insurance, HOA dues, down payment, escrow deposits, reserves, and property operating costs are excluded here and still need separate budgeting.
Your holding period changes the comparison.
For this example, financing cost means interest paid through the stated month, plus the upfront loan costs. Principal repayments reduce the loan balance and are excluded from this cost measure. This is not an APR calculation or the total cash needed to buy or operate the property.
| Paid off after | Option A | Option B |
|---|---|---|
| 12 months | $29,403.46 | $24,906.22 |
| 36 months | $70,533.56 | $69,057.91 |
| 60 months | $110,649.22 | $112,210.92 |
Option B has lower financing cost at 12 and 36 months under these assumptions. By 60 months, the lower rate on Option A has offset its higher upfront charge. Changing the fees, repayment schedule, or payoff terms changes the result.
Check the remaining principal at payoff
These balances must also be repaid when the loan is paid off. They are separate from the financing-cost totals above.
| After | Option A | Option B |
|---|---|---|
| 12 months | $296,952.57 | $297,234.50 |
| 36 months | $290,180.89 | $291,042.74 |
| 60 months | $282,394.77 | $283,852.31 |
Payments are calculated using monthly amortization at the stated annual rate divided by 12. Calculations retain precision; displayed values are rounded to cents. A lender's payment rounding and interest conventions may produce small differences.
Bring the actual terms back into the picture.
- Rate and fees: compare lender charges, any broker compensation, third-party costs, and any financed fees.
- Repayment: identify fixed, adjustable, amortizing, interest-only, or balloon features.
- Exit: ask for the written prepayment schedule and the cost of paying off at your intended sale or refinance date.
- Qualification: confirm how the lender treats rent, reserves, ownership, and the intended rental use.
Use a financing comparison worksheet to keep the same questions beside each proposal. Your initial review with Stephens Capital Group can help identify the details to confirm.