A DSCR loan approves a rental on its income instead of yours. On Oahu, high prices mean the ratio is often tight, so knowing exactly what goes into it matters more than it does in most markets.
The ratio
Divide the monthly rent by the monthly payment. The payment counts principal and interest, property tax, insurance, association fees and any leasehold lease rent.
| Rent | Payment | DSCR |
|---|---|---|
| $5,200 | $4,000 | 1.30 |
| $4,000 | $4,000 | 1.00 |
| $3,600 | $4,000 | 0.90 |
We prefer 1.0 or better. Strong borrowers can qualify below 1.0 with a larger down payment, and there is a no-DSCR option up to 75% loan-to-value at a higher rate.
Getting the inputs right on Oahu
- Rent. Use long-term market rent unless the property may legally rent for short stays. See our guide to Oahu short-term rental rules.
- Property tax. Use the class the property will be in once you own it. See Honolulu property tax on investment property.
- Insurance. Include hurricane coverage, and flood coverage where it is required.
- Association fees and lease rent. Include the full amount. See buying a Honolulu condo as an investment.
Ways to make the numbers work
- A larger down payment lowers the payment.
- An interest-only period lowers the payment in the early years, and you can qualify on the interest-only payment.
- A 5-year prepayment penalty usually prices lower than a 3-year one.
- Adding an additional dwelling unit, where the lot allows, can add rent.
Terms are on the DSCR rental loans page.