Are you a real estate investor looking to expand your portfolio but don’t want to refinance your existing mortgage? A DSCR (Debt Service Coverage Ratio) second mortgage could be the perfect solution, allowing you to tap into your property’s equity to fund new investments, without disturbing your current loan.
How a DSCR Second Mortgage Works
Let’s break it down with a real-life scenario:
The Borrower’s Situation
- Credit Profile: 753 FICO (strong credit)
- Loan-to-Value (CLTV): 80% (maximum allowed)
- Rental Income: $1,000/month (based on the lesser of the lease agreement or market rent per the appraisal)
- Proposed PITIA (Principal, Interest, Taxes, Insurance, and Assessments): $1,000
- Initial DSCR Calculation:
- 1,000(GrossIncome)/1,000(GrossIncome)/1,000 (PITIA) = 0.95 DSCR
Since most lenders require a minimum 1.00 DSCR, this borrower wouldn’t typically qualify for a second mortgage.
The Non-QM Solution
Our DSCR closed-end second mortgage program offers flexibility where traditional lenders fall short. If our borrower can provide proof of three months of higher rent payments than what’s stated in the lease or appraisal, we can use that increased income to improve the DSCR.
By adjusting the rental income to reflect the actual higher payments, the borrower could meet the 1.00 DSCR requirement, securing the financing needed for their next investment property.
Key Features of Our Closed-End DSCR Second Mortgage
- Minimum FICO: 680
- Loan Amounts: 75,000–500,000
- DSCR Requirement: 1.00+
- Eligible Properties:
- Single-Family Residences (SFR)
- Planned Unit Developments (PUD)
- Townhomes
- 2-4 Units (with a 5% reduction in maximum CLTV)
If you’re an investor looking to access equity without refinancing, a DSCR second mortgage could be your best move. We specialize in creative financing solutions that help you achieve your investment goals.
Contact us to see how we can help you access equity from your investment properties.
