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If you’re financing a rental or investment property priced over $500,000, the choice between a DSCR loan and conventional financing can significantly impact your bottom line.
While conventional loans offer lower interest rates, DSCR loans offer greater flexibility, especially for investors who own multiple properties, don’t want to use personal income, or prefer to finance through an LLC.
In this 2025 guide, we’ll break down the true cost of each financing option—including interest, fees, loan flexibility, and long-term returns—to help you make the smartest move on high-value investments.
What’s the Difference Between DSCR and Conventional Loans?
| Feature | DSCR Loans | Conventional Loans |
| Approval Based On | Rental income of property (DSCR) | Personal income + DTI |
| Income Documents | No tax returns or W-2s required | 2 years tax returns + pay stubs |
| Ownership Options | Can close in LLC or corporation | Must close in personal name |
| Max Properties | Unlimited (depends on lender) | Capped at 10 financed properties |
| Typical Rates (2025) | 7.5%–9.0% | 6.0%–7.5% |
| Loan Amounts | Up to $5M+ per property | Conforming limits or jumbo pricing |
Learn more about DSCR loan basics and qualification
DSCR vs Conventional: Total Cost Example on a $750,000 Investment Property
Let’s compare both options on a $750K property with $150K down (20%).
DSCR Loan Example
- Loan Amount: $600,000
- Rate: 8.5% (fixed)
- Term: 30-year fixed
- Monthly P&I: $4,601
- Closing Costs: ~$10,000 (including points, title, underwriting)
Conventional Loan Example
- Loan Amount: $600,000
- Rate: 6.75% (fixed)
- Term: 30-year fixed
- Monthly P&I: $3,891
- Closing Costs: ~$8,000
Cost Over 5 Years (Interest Only)
| Cost Category | DSCR Loan | Conventional Loan |
| Monthly P&I | $4,601 | $3,891 |
| Total Paid (60 mos) | $276,060 | $233,460 |
| Interest Portion | ~$249,000 | ~$206,000 |
| Estimated Cash Flow* | $1,000/month | $1,700/month |
*Assuming $5,600 gross monthly rent
Verdict: While conventional wins on cost, DSCR often wins on accessibility and scalability—especially if you’re expanding fast, write off a lot of income, or own 10+ properties.
Why DSCR Might Be Worth the Higher Cost
While DSCR loans come at a premium, they offer value where conventional loans can’t:
- No tax return or income hurdles
- LLC-friendly for liability protection
- No property count limits
- Fast closings—often under 21 days
DSCR financing helps you scale without hitting the roadblocks that kill deals for high-volume investors.
Want a side-by-side cost breakdown for your scenario?
Request a free DSCR vs conventional comparison
When Conventional Financing Is a Better Fit
Choose conventional if:
- You’re early in your investing journey
- You don’t own more than 4–10 financed properties
- You show strong, W-2-verified income
- You want the lowest possible interest rate
Check out our complete guide to conventional loans for investors
FAQs: DSCR vs Conventional Financing for Properties Over $500K
Can I refinance a DSCR loan into a conventional loan later?
Yes, many investors use DSCR loans to acquire fast, then refinance conventionally after seasoning or stabilizing income.
Do DSCR loans have prepayment penalties?
Some do (often 3–5 years). Always check the term sheet before signing.
Are jumbo loans better than DSCR for large investments?
Jumbo loans offer lower rates but require full documentation and excellent credit. DSCR is better for investors who prioritize flexibility.
Read Next:
- DSCR Loans Explained: The Best Loan for Rental Property Investors
- How to Use Multiple DSCR Loans to Maximize Leverage Without Hitting Caps
Final Thoughts
When financing properties above $500K, DSCR loans and conventional loans both have a place in your investing toolkit. While conventional wins on total cost, DSCR gives you the freedom to scale faster, especially when you’re self-employed or juggling multiple doors.
Compare offers from both sides before making your next move.
Run your numbers with our DSCR vs conventional loan calculator
Need expert help?
Schedule a mortgage strategy call to explore your best-fit options in 2025.
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
