The Quick Read: A sale inside the prepayment window forces a full payoff of the note, or a negotiated partial release if one loan covers several rentals, and the prepayment charge is figured on the balance being repaid, so at super jumbo size a small percentage becomes a large cost that you should map before listing anything.
- A full-portfolio sale and a one-property sale are two different paths with two different costs.
- The charge runs on the balance at payoff, not the original loan, and an interest-only balance has not amortized.
- A release price runs above the property’s allocated balance, and the properties you keep must still cover their debt service.
- A buyer cannot simply step into your note. Assumption is the exception, not the default.
- The answers live in the note, the prepayment rider and the release language, so read them before you sign.
Key Terms Defined
Seven terms carry this whole topic. Here they are once, in plain words.
Prepayment charge: a fee written into the note if you repay the loan early, usually during a set window.
Step-down schedule: a prepayment charge that gets smaller each year of the window.
Yield maintenance: a charge sized to what the lender loses by being repaid early. It shrinks as the remaining term shrinks.
Cross-collateralization: one note secured by several properties. Investors also call this a portfolio DSCR loan or a blanket loan, and all three names describe the same thing.
Allocated balance: the slice of the total debt the loan documents assign to each property.
Release price: what you pay to free one property from the note. It runs above that property’s allocated balance.
Due-on-sale clause: language letting the lender demand full repayment if you sell or transfer the property without consent.
What Is a Five-Year Super Jumbo Note?
Super jumbo is not a legal category. Each lender sets its own line, and across the wholesale network Lendmire works with, the line tends to sit around $3,000,000, where the standard DSCR program stops. Past that point the size ladder takes over, with loans running up to $10,000,000, subject to underwriting.
The ladder steps leverage down as balances climb. On a purchase of an investment property, the ceilings run 80% to $1,000,000, 75% to $3,000,000 and 65% to $4,000,000. Above that, 60% is available on review. Every figure is a ceiling through select wholesale programs, subject to underwriting.
Two structures matter for portfolios:
- The rental portfolio term loan puts five or more rentals under one note. Loan sizes start at $500,000 and run up to $10,000,000, with larger balances on review. Leverage goes up to 75% of value. Terms are fixed at 3, 5, 7 or 10 years, with a balloon at maturity. That means the unpaid balance comes due in one lump when the term ends. This is the typical home of a five-year portfolio note.
- The 30-year portfolio DSCR loan puts two to 20 properties under one note, from $300,000 to $5,000,000, with leverage up to 80% on a purchase or rate-and-term refinance. Coverage is measured on the pool, and an interest-only period is available. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. That rent-based approach is why a high-net-worth investor can hold luxury rentals in an LLC, subject to program terms, without leaning on traditional personal-income documentation. The complete DSCR loans guide covers the basics if the ratio itself is new to you.
What Happens When You Sell Early?
Selling early takes one of two paths, and which one you are on depends on how the debt is built.
Path one: the whole note is paid off. This happens if you sell the entire portfolio, if the note has no release clause, or if you sell the one property that secures a single-property loan. The payoff statement from the servicer shows the balance, accrued interest and any prepayment charge. The escrow agent uses that statement to pay the lender. The lien is released once the payoff arrives.
Path two: one property is released from the pool. This works only if the loan documents allow it. The partial release, substitution and sale of one property out of a pool follow the documents and the lender’s release terms. You pay the release price. The remaining properties then have to carry the remaining debt.
If each property has its own loan, a sale generally affects only that property’s loan. If one note spans several, the release clause is the whole ballgame. No clause means no sale of a single property without paying off everything.
Prepayment Charge vs. Release Price: Two Costs That Stack
These two costs get blended together in conversations, and they should not be. The release price is the cost of freeing the property. The prepayment charge is the cost of repaying early. On a pooled note you may owe both.
The prepayment charge depends on the note’s structure. On the rental portfolio term loan, the five-year note carries yield maintenance for 54 months, which leaves the last six months of the term open. Many single-property DSCR notes use a step-down schedule instead, falling each year across a five-year window. Either way, you choose the structure when the loan is priced. A longer or heavier penalty generally buys a better price on the note, and a shorter or zero penalty costs more. That trade is made once, before you know what the market will do.
The charge applies to the principal being repaid. It does not apply to the original loan amount. That is why super jumbo balances matter so much. One percentage point of a very large balance is a very large number, and the same percentage on a smaller loan would barely register.
Here is how the line items compare on the two paths. These are structural comparisons, not quotes.
| Line item | Whole-portfolio sale | One-property sale |
|---|---|---|
| Debt repaid | Full balance at payoff | Release price for that property |
| Prepayment charge | On the full balance | Per the note’s release terms |
| Selling costs | Every property | Only the one sold |
| Pool afterward | None | Must still cover its debt |
| Loan afterward | Satisfied | Stays in place |
Whether the prepayment charge hits the principal repaid at release is a question the table cannot answer for you. Across the wholesale network, that answer sits in the release section of the documents and differs from lender to lender. Ask for it in writing before you sign.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Mapping Your Sale Date to the Schedule
The sale date matters more than most investors expect. On a yield-maintenance note, the cost shrinks as the remaining term shrinks. Pensford’s comparison of defeasance and yield maintenance shows the cost turns on the gap between what the note pays and what the lender can earn by reinvesting, plus the remaining term and the balance. Those mechanics come from agency lending, so treat them as a contrast. They show why the calendar changes the number.
On a step-down schedule, the cost drops at each anniversary. A sale a few weeks before an anniversary can cost noticeably more than one just after it. On the five-year term loan with yield maintenance for 54 months, a sale after month 54 falls outside the window entirely.
Picture an investor holding a pooled note who plans to sell two rentals in the fourth year. Waiting for the next step-down, or for the window to end, is a real option. It has to be weighed against market conditions and carrying costs.
Which Property Do You Sell First?
Sale order changes what is left in the pool. Coverage on the term loan and on the 30-year portfolio structure is tested on pooled rents against pooled debt service, so stronger properties can offset weaker ones. Remove a strong one, and the pool loses that cushion.
| Sale order | Effect on remaining pool |
|---|---|
| Strongest rental first | Pool coverage thins fastest |
| Weakest rental first | Pool coverage often improves |
| All at once | No pool left to test |
Weakest-first sounds safe, but it is not automatic. The release price still runs above the allocated balance, and a weak property is often the one a buyer wants least. Strongest-first can leave you holding a pool that struggles to clear its test. The remaining portfolio must still cover its debt service.
A rental below 1.00 coverage can sit inside a pool. Underwriting tests the pooled coverage, the leverage and the terms. On the 30-year structure, the pooled floor is 1.00, so pooled coverage below it is not an option. What helps is one weak property inside a pool that still clears the floor.
Investors who sell in stages from a pooled loan usually do best when they ask for a pro forma of the remaining pool at each release before they sign. A release that looks fine on paper can drop the leftover properties under the pool’s coverage or reserve tests. That is a much worse place to learn it than the negotiating table.
Where the General Rule Breaks
Every rule above has an edge case. These are the ones that catch investors.
No release clause. Then selling one property means repaying the entire note, prepayment charge included. Some notes make release discretionary, which means the lender can say no.
Interest-only balances. On a note with an interest-only period, the balance has not amortized, so the payoff equals the original amount. The single-property ladder allows 120 months of interest-only up to 75% leverage, subject to underwriting. That runway helps cash flow during the hold. It does nothing to shrink what you owe at an early exit. Is Interest-Only the Right Super Jumbo Structure for a Five-Year Hold? covers that trade-off. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Assumption. A buyer taking over your loan avoids the payoff, but it requires lender consent. On the rental portfolio term loan, a one-time purchaser assumption is available on loans above $5,000,000, subject to underwriting and an assumption fee. Below $5,000,000, assumption is on an exception basis. Do not plan around it unless the documents say so.
Due-on-sale. Federal law, the Garn-St Germain Act, lets a lender declare the loan due if any part of the property is sold without written consent. The exceptions are narrow and aimed at small residential property. They do not fit an arm’s-length portfolio sale. A handshake transfer where the buyer simply starts making your payments is a due-on-sale problem.
Yield maintenance versus defeasance. These are different things. Defeasance swaps securities in as collateral, and the loan is not repaid. It belongs mostly to commercial and securitized debt. Confirm in your own note which structure it uses.
Entity vesting. Overlays at super jumbo size apply to an LLC borrower the same as to an individual, subject to program terms.
Thin exits. Fewer buyers can finance a very large property, and cash-out refinancing is not available above $3,000,000 on the ladder. A refinance is not a substitute for a sale, and it triggers the same prepayment charge anyway.
Non-recourse carve-outs. The term loan can be non-recourse, meaning it looks to the real estate, with recourse limited to carve-outs such as fraud and bankruptcy. A transfer that violates the documents can raise those issues.
State law can also change how a prepayment charge is enforced. It varies, so ask counsel where the property sits.
Misconceptions About Prepayment on Investor Loans
Prepayment penalties are banned. Not on this loan. Consumer mortgage penalties are limited by federal rules. The Federal Register notice on the ability-to-repay and qualified mortgage rule explains that business-purpose loans fall outside those rules, and that investment-purpose loans count as business purpose. For you, that means the penalty is a matter of contract. It lives in the note and rider, not in a statute.
The penalty runs forever. It ends when the window ends, so check whether the schedule falls to zero or floors at a set level.
A pooled loan lets me sell one house freely. Only if the documents include a release clause. Even then the release price runs above the allocated balance.
A private sale skips the clause. Due-on-sale applies to the sale itself.
Super jumbo is a regulatory tier. It is a lender-set overlay, nothing more.
Pre-Listing Checklist
Pull these before you call a broker to list anything:
- The note and the prepayment rider, with the window dates marked on a calendar.
- The release section, including any cap on releases or minimum remaining property count.
- The allocation schedule showing each property’s allocated balance.
- A payoff statement from the servicer for the planned sale date.
- The post-release tests on coverage, leverage and reserves.
- Language on assumption and consent.
The sequence on a sale runs the same way each time. The servicer issues the payoff or release statement. The escrow agent funds from the sale proceeds. The lien comes off once the payoff is received.
One Pooled Note or Separate Notes?
This one is a genuine toss-up. A pooled note usually means one set of documents, pooled coverage that lets strong properties carry weak ones, and a single payoff.
If you are fairly sure you will sell everything together, a pooled note fits. If you expect to sell in stages, separate notes, or a pool with a clearly written release clause, deserve a hard look. Interest-only features, the size ladder and the prepayment structure all interact here, so settle the exit before you settle the note.
Frequently Asked Questions
Does the prepayment charge apply to a partial release?
It depends on the note. Some documents apply the charge to the principal repaid at release, and others treat the release price as the only cost. Ask for the release terms in writing and compare them to the prepayment rider before you commit.
Can a buyer take over my super jumbo note?
Sometimes, but not by default. Assumption needs lender consent. On the rental portfolio term loan, a one-time purchaser assumption is available above $5,000,000, subject to underwriting and an assumption fee, and below that on an exception basis.
Is a whole-portfolio sale cheaper than selling in stages?
Not necessarily. A whole sale pays the charge once on the full balance. Staged sales pay release prices and may pay the charge on each piece, while leaving a smaller pool to test. The sale dates against the schedule usually decide it.
What changes once the prepayment window ends?
The charge stops. On the five-year term loan with yield maintenance for 54 months, the last six months of the term are open. Selling then costs the payoff and the release terms, if any, but no prepayment charge.
Does interest-only change what I owe at exit?
Yes. An interest-only balance has not amortized, so the payoff equals the original loan amount. That is a larger number than an amortizing loan would show at the same point.
Next Step
If you are buying or refinancing a high-balance rental property and want to see how the numbers work, Lendmire can help you compare super jumbo DSCR loan options based on the property income, the loan balance, credit profile, leverage, and investor goals. Lendmire is a broker arranging business-purpose financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Every file is underwritten individually, and nothing here is a commitment to lend.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Pensford: Freddie Mac Defeasance vs. Yield Maintenance
2. Garn-St Germain Act, 12 U.S.C. § 1701j-3
3. Federal Register: Ability-to-Repay and Qualified Mortgage Standards
This article is part of Lendmire’s super jumbo DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a Super Jumbo DSCR Loan on a Luxury Airbnb? · Can Art or a Yacht Be Pledged on a Super Jumbo DSCR Loan? · Securities Line vs Super Jumbo DSCR Loan After a Company Sale
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.