How Loan Buyers Price Bridge and DSCR Loans: A Lender's Guide
How loan buyers price bridge and DSCR loans to a target yield: par, premium or discount, servicing retained or released, what moves price, and an example.
Loan buyers price bridge and DSCR loans "to yield": they decide the return they need on a loan with that risk, apply it to the loan's expected cash flows, and the result is the price they will pay, quoted as a percentage of the balance. If your note rate, after any servicing fee you keep, beats the buyer's target, the loan can sell at a premium. If it falls short, it sells at a discount.
The same arithmetic plays out very differently for a 12-month bridge loan and a 30-year DSCR loan, because the length of the cash flows changes what each point of rate is worth. This guide covers the mechanics, what moves price, a worked example and how a sale compares with direct capital placement. For who funds private lenders, see capital providers for private lenders.
Key takeaways
- Buyers price to a target yield: the present value of expected cash flows at their required return.
- Prices are quoted against the balance: 100 is par, above is a premium, below is a discount.
- Servicing retained lowers the rate the buyer receives, so it lowers the price; servicing released adds the value of servicing to the price.
- On bridge loans, the short and uncertain life keeps premiums small. On DSCR loans, the longer life magnifies premiums and discounts, so prepayment penalties matter.
- Leverage, experience, credit, property, size and file quality move the target yield.
What does it mean to price a loan to yield?
Pricing to yield means the buyer starts from the annual return it requires on a loan of that risk, then works out what it can pay today for the loan's expected interest and principal to earn exactly that return. A higher required yield means a lower price, and a lower one a higher price.
The inputs are the loan's net rate (note rate less any servicing fee the seller keeps), its expected life (when it will really be repaid, not the stated maturity), its payment pattern, and the target yield, which reflects the buyer's cost of capital and the risk it sees in your loan.
The OCC's Mortgage Banking handbook shows the same logic in agency lending: when the security price is 99, a lender "must charge its customer one discount point" to price the loan at the market. A rate gap becomes points of price.
What are par, premium and discount pricing?
Par means the buyer pays exactly the unpaid principal balance, a price of 100. A premium is a price above 100, paid when the loan's net rate exceeds the buyer's target yield. A discount is a price below 100, when the net rate falls short of the target or the buyer sees risk it wants paying for.
On a $500,000 balance, par is $500,000, a 100.5 premium is $502,500 and a 99 discount is $495,000.
Premiums carry a catch. The OCC notes that sellers can face "premium recapture," where they "may have to forfeit premiums received from the sale of loans that refinance within a defined period." Purchase agreements often include similar clauses, so read them before you count a premium.
How does servicing retained vs. released change the price?
If you sell servicing released, the buyer gets the full net interest and the right to service, and the value of that servicing is reflected in the price. If you retain servicing, you keep a fee out of every payment, so the buyer receives a lower rate and pays a correspondingly lower price.
The OCC says that if loans "are sold servicing released, the MSR value is reflected in the servicing release premium and in the increased gain on sale." Servicing also means draws, extensions and borrower contact, so it is a relationship decision as much as a pricing one; see can private lenders keep the borrower when selling a loan.
What drives the price a buyer will pay for a bridge or DSCR loan?
Price moves with anything that changes the buyer's view of risk, expected life or cost to own the loan. For bridge loans that means leverage against cost and after-repair value, borrower experience and the exit. For DSCR loans it means rental coverage, credit, prepayment protection and whether the loan fits the buyer's securitization or financing.
| Factor | Bridge / fix-and-flip | DSCR rental |
|---|---|---|
| Leverage | LTC and ARV LTV, plus as-is LTV | LTV on value |
| Borrower | Completed projects, liquidity, credit | Credit score, reserves, investor history |
| Cash flow | The exit: sale or refinance | DSCR: rent vs. payment |
| Term and life | Short, often a year or two; extensions add life and risk | 30 years, but expected life is far shorter |
| Prepayment | Early payoff shortens the premium's life | Prepayment penalty protects the premium |
| Property and market | Property type, location, rehab scope, construction | Property type, units, rent stability, market |
| Documentation | Appraisal, budget, draw schedule, title, insurance | Appraisal, leases or rent schedule, title, insurance |
Rating agency criteria show what institutional buyers that securitize watch. Morningstar DBRS says its residential transition loan model looks at factors including "property liquidity ratio, borrower experience, project size," borrower liquid reserves, loan term extensions, and "FICO score, Loan-To-Value ratio" (Morningstar DBRS, 2023). KBRA's July 2026 research notes that RTL deal eligibility criteria commonly limit "loan size, leverage, unfunded commitments, construction exposure" (KBRA, 2026). DSCR loans are securitized too: Morningstar DBRS has rated pools "backed entirely by loans originated to investors under debt service coverage ratio (DSCR) programs" (Morningstar DBRS, 2020). Fit with those pool criteria affects price.
File quality is the factor you control most. The OCC notes that loans with credit problems or missing documents can be bid at a discount or not bought at all. A complete, consistent file removes reasons to cut the price.
How can a lender model a buyer's price?
Write down the loan's net rate, expected life and payment pattern, then discount its cash flows at a few plausible target yields. A spreadsheet's present-value function does the work and shows how sensitive price is to the buyer's yield and to an early payoff.
Hypothetical example, for illustration only. Monthly payments, rounded.
Bridge loan: $500,000, 11% interest-only, 12-month expected life. You retain servicing at 0.50%, so the buyer's net rate is 10.5%.
| Buyer's target yield | Price | Proceeds |
|---|---|---|
| 10.0% | about 100.47 | about $502,400 |
| 10.5% | 100.00 (par) | $500,000 |
| 11.0% | about 99.53 | about $497,600 |
If the buyer pays about 100.47 and the borrower repays at month 6 instead of 12, the buyer's yield drops to about 9.5%; at month 3, to about 8.6%. That is why bridge buyers keep premiums small, and why extension and minimum-interest terms matter to them.
DSCR loan: $400,000, 7.75% fixed, 30-year amortization. You retain servicing at 0.25%, so the net rate is 7.50%. The buyer assumes payoff in year 5.
| Buyer's target yield | Price, payoff in year 5 | Price, payoff in year 2 |
|---|---|---|
| 7.00% | about 102.1 | about 100.9 |
| 7.25% | about 101.0 | about 100.5 |
| 7.50% | 100.00 (par) | 100.00 (par) |
The same half-point of rate is worth about twice as much if the loan stays outstanding for five years rather than two. A prepayment penalty makes the longer life more likely, or pays the buyer if it doesn't happen, which is why it supports a higher price. Real pricing varies by buyer, loan and market; use these tables only to understand the mechanics. For how the note rate and points are set in the first place, see how private lenders price a loan.
How does selling a loan compare with direct capital placement?
In a sale, the buyer takes the future interest and you are paid at sale, through a premium or discount on top of your points. In direct capital placement, a capital partner funds the loan at closing at its agreed rate, and you keep your points (less a placement fee) and the spread between your note rate and that rate.
| Sale after closing | Direct capital placement | |
|---|---|---|
| Who funds at closing | You (cash or a warehouse line) | One capital partner |
| How the capital source's return is set | Price to its target yield after you close | Its agreed rate, known before you close |
| What you earn | Points, plus any premium (or minus a discount) | Points less a placement fee, plus a yield spread for the loan's life |
| Early payoff | May trigger premium recapture | Spread ends when the loan pays off; no premium to refund |
| Your capital at risk before sale | The whole loan | None |
| Servicing and borrower | Released or retained, per the sale | You keep both |
Hypothetical, round numbers. A $500,000 bridge loan at a 12% note rate with 2 points, placed with a capital partner whose agreed rate is 10%. You earn $10,000 of points less a $5,000 placement fee at closing, plus a 2% spread, about $10,000 a year while the loan is outstanding. Try your own numbers in the lender spread calculator. If you fund loans on a line until sale, compare a warehouse line alternative. For sales end to end, see what is a whole loan sale, and for correspondent programs, correspondent lending for private lenders.
Frequently asked questions
How are whole loans priced?
As a percentage of the unpaid balance. The buyer discounts the loan's expected cash flows at its target yield: if the loan's net rate beats that yield it sells at a premium, if not at a discount, and if they match, at par.
Why do DSCR loans have prepayment penalties?
Partly to protect the lender's or buyer's expected return. A longer expected life makes an above-market rate worth more, and a penalty either keeps the loan outstanding or compensates the holder for an early payoff, which supports a better price.
Do I get a higher price if I sell servicing released?
Usually yes, because the buyer receives the full net interest and the servicing rights, and pays for them. You give up the servicing fee and, often, day-to-day contact with your borrower.
How Lender Capital fits
Lender Capital gives lenders two paths, and it never lends or buys loans with its own money: capital partners fund or buy the loans. If you already funded a loan, you can sell your hard money loans through Lender Capital: a capital partner whose criteria the loan fits reviews the full file and buys the whole loan, for a sale fee of 0.75% of the purchased balance (0.50% for preferred lenders), $2,500 minimum, only if the sale closes. Or place new loans before closing: you apply once and are reviewed, then submit each first-lien, business-purpose bridge, fix and flip, ground-up construction or DSCR loan with the full file. We send it only to capital partners whose criteria it fits, and the partner sees the full file before committing. One partner funds the whole loan at closing (table funded) and the loan is assigned to it at closing, so there is no post-closing price to negotiate. You keep your points (less the placement fee) and earn a yield spread: price the note above the partner's agreed rate and the difference is yours. You keep servicing and the borrower relationship. The placement fee is paid at closing from the points only when a loan funds: 1.00% of the loan amount up to $3,000,000 and 0.75% above that, with a $2,500 minimum.
Compare your options on the capital providers for private lenders page, read how table funding works, or apply as a lender.
Sources
- Office of the Comptroller of the Currency, Comptroller's Handbook: Mortgage Banking (pricing example, servicing release premium, premium recapture, discounts for credit and documentation problems)
- Morningstar DBRS, Requests Comments on Proposed Methodologies for Residential Transition Loans (2023)
- KBRA, Laying the Foundation: The Evolution of RTL Lending (2026)
- Morningstar DBRS, Visio 2020-1 Trust presale report (2020), an example of a rated DSCR loan securitization
Have a loan you can’t fund?
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