3-2-1 Step-Down Prepayment Penalty
Bottom Line Up Front (BLUF): Ideal for value-add BRRRR and medium-term rental investors who anticipate refinancing or selling in Years 3โ4 without paying a Year-4 or Year-5 penalty.
Underwriting Formula / Rule
Months 1โ12: 3% | Months 13โ24: 2% | Months 25โ36: 1% | Month 37+: 0%.
Wholesale Shelf Benchmark
Available across 90%+ of wholesale DSCR shelves.
Frequently Asked Underwriting Questions
Does a 3-2-1 prepay allow partial principal curtailment?
Many wholesale notes allow paying down up to 20% of the original principal balance per year without triggering the prepayment fee.
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