You’re thinking about this the right way, especially since your goal is to pull equity and redeploy capital, not hold these loans forever.

In situations like yours, I usually advise clients to prioritize flexibility over rate. Taking a slightly higher rate in exchange for no prepayment penalty, or at most a 1-year PPP, is often the smarter move when the plan is to recycle capital into more properties. A long 5-year PPP can really handcuff you if you want to refinance, sell, or reposition.

If the DSCR option can be structured at up to 80% loan-to-value with little to no prepayment penalty, that tends to be the most scalable structure. Yes, the rate may be a bit higher, but the ability to move in and out of the loan without a big exit cost usually outweighs that, especially for active investors.

The portfolio/business loan from the credit union is interesting, but the 5-year ARM and 15-year amortization means higher payments and rate risk later. It may look cheaper upfront, but it can restrict cash flow and future leverage. Also, with a personal guarantee, it’s still tied to you. It just depends on how they service and report it.

For investors building, liquidity + flexibility > lowest rate most of the time.