A Michigan DSCR loan is business-purpose financing on a 1-4 family rental, secured by a mortgage that can be foreclosed by advertisement under MCL 600.3201 or through the circuit court.
Michigan allows both foreclosure by advertisement and judicial foreclosure, and its prepayment rule is written around the property type rather than the borrower. On a single-family rental, that can cap what a lender charges if you sell or refinance early.
If you're comparing a DSCR loan with a bank loan on a Michigan single-family, start with the side-by-side on limits and pricing.
How are rental property loans foreclosed in Michigan?
Michigan allows foreclosure by advertisement, outside court, when the mortgage contains a power of sale under MCL 600.3201, and judicial foreclosure in circuit court under MCL 600.3101.
| Path | Michigan statute |
|---|---|
| Foreclosure by advertisement | MCL 600.3201, where the mortgage has a power of sale |
| Judicial foreclosure | MCL 600.3101, in circuit court |
Exception: Which path a lender uses depends on its mortgage terms. Read the power of sale clause before you sign.
According to MCL 600.3201 and MCL 600.3101, Michigan Legislature, as of October 2026.
Does Michigan limit prepayment penalties on rental property loans?
Where the security is a single-family dwelling, MCL 438.31c(2)(c) bars a covered lender from charging a prepayment penalty above 1% of the amount prepaid within three years, or any penalty after three years.
- The statute's text has no owner-occupancy or natural-person limit.
- Subsection (5) limits the rule to lenders approved as mortgagees under the National Housing Act or regulated by a state or federal agency, and the lead-in to subsection (2) excludes loans insured or guaranteed by the federal government.
- On its face, the rule covers single-family dwellings, not 2- to 4-unit properties.
Exception: Michigan's business-entity usury rules and federal preemption may affect whether the cap applies to a given lender; neither was researched here. Ask the lender.
According to MCL 438.31c, Michigan Legislature, as of October 2026.
Does Michigan tax the mortgage on a rental property loan?
Michigan's State Real Estate Transfer Tax Act exempts instruments given as security, under MCL 207.526(d).
- The state transfer tax applies to deeds and other instruments of conveyance, with listed exemptions.
- MCL 207.526(d) lists instruments given as security among the exemptions.
Exception: The county transfer tax act has its own exemption list, and recording fees are separate; neither is covered here.
According to MCL 207.526, Michigan Legislature, as of October 2026.
What Michigan landlord rules affect a rental property's numbers?
Michigan caps a security deposit at 1.5 months' rent under MCL 554.602 and requires the landlord to mail an itemized list of damages within 30 days after the tenant's occupancy ends.
- MCL 554.602 sets the 1.5-month cap.
- MCL 554.609 sets the 30-day itemized-list requirement.
Exception: MCL 554.609 was amended in 2026. Read the current section before relying on any detail beyond the 30-day rule.
According to MCL 554.602 and MCL 554.609, Michigan Legislature, as of October 2026.
Local guides for Michigan: Detroit, Grand Rapids.
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Disclaimer
This page is general education about business-purpose real estate financing and state law as published by official sources on the date shown. It is not legal, tax or lending advice, not an offer to lend and not a rate quote. Laws and lender guidelines change; confirm current rules with the lender, the title company and your own attorney or tax adviser.