What are the drawbacks of a DSCR loan in Connecticut?

There are a few DSCR loan drawbacks:

• Prepayment penalty
  A prepayment penalty is a fee charged by a lender if a borrower pays off their loan early and it is common with DSCR loans. The reason is that they encourage borrowers to keep the loan for the full term. If a borrower were to pay off their loan early, the lender would miss out on the interest payments that are used to make up the difference between the loan amount and the property’s value.
• Higher interest rates
  One drawback is that this type of loan typically has a higher interest rate than other types of loans, which could make it more difficult for the borrower to repay the loan in full.

While there are some drawbacks to a DSCR loan in Connecticut, many borrowers find that its benefits outweigh the risks.