Creative financing is common in Knoxville's investor community: seller-carried notes, private loans from other investors, and hard money on rehabs. Most of those loans come due in a few years. A DSCR rate-and-term refinance replaces them with a long-term payment the rent can carry.
In short: LendingStreet refinances 1-8 unit Knoxville rentals into DSCR loans that pay off hard money, bridge loans, seller financing, balloon notes or an existing mortgage, qualified on the property's rent with no tax returns. Rate-and-term refinances go up to 80% LTV on some programs, 30-year terms are available, the standard minimum DSCR is 1.0x and the minimum credit score is 620.
Each of these comes with a due date. The refinance is about replacing that date with a fully amortizing loan.
Many of these loans were the right tool at purchase, because they closed quickly or required little documentation. As the due date gets closer, a long-term DSCR loan gives you a predictable payment and removes the refinancing deadline.
This example is illustrative and not a quote. An investor bought and renovated a three-bedroom home in Inskip with a private loan, interest-only, now at $182,000 and paying about $1,517 a month. The note matures next year. The home appraises at $270,000 and rents for $1,850.
A rate-and-term DSCR loan of $187,800 pays off the note and about $5,800 in closing costs, about 70% of value. Estimated principal and interest is about $1,312. With taxes of about $217 and insurance of $160, the payment is about $1,689, for a DSCR of about 1.10x.
The payment is a little higher because it now includes principal, but the balloon is gone and the balance starts going down.
If the appraisal had come in lower, the investor could bring a small amount of cash to closing to stay within the LTV limit. Plan for that possibility before you order the appraisal.
| Item | Private note | DSCR refinance |
|---|---|---|
| Loan balance | $182,000 | $187,800 |
| Monthly loan payment | $1,517 interest only | $1,312 principal and interest |
| Taxes and insurance | $377 | $377 |
| Total monthly payment | $1,893 | $1,689 |
| Maturity | Balloon next year | 30 years available |
Seller-financed deals are popular in East Tennessee, especially on older rentals. When the balloon comes due, you need a payoff letter from the seller and a clean release of their lien at closing.
If the seller is an individual, give them plenty of notice. Title will need their signature on the release, and delays can push your closing.
If the note requires advance notice before payoff, read it carefully and follow its terms. Some sellers want a specific payoff date, which your closing schedule needs to meet.
Values in neighborhoods like Inskip, Fountain City and South Knoxville vary with condition. A full renovation can lift a home well above unrenovated neighbors. Give the appraiser your improvement list and permits.
If you added bedrooms or square footage, have the permit history ready. Unpermitted space may not count.
Gather receipts, before-and-after photos and permits from the rehab. A clear record of the work helps the appraiser support the finished value.
In Inskip and nearby North Knoxville neighborhoods, renovated homes have been selling to both owner-occupant buyers and investors, which gives appraisers more recent sales to work with than in the past. Ask your agent for the closest renovated sales before the appraisal.
Rate-and-term pays off existing debt and closing costs with little or no cash back, up to 80% LTV on some programs. Cash-out allows up to 75% LTV and returns equity.
If you want to recover rehab funds, compare our Knoxville cash-out page. If you only need to replace a maturing loan, rate-and-term is usually simpler.
A rate-and-term refinance can also simply improve a loan you already have: lowering the payment after rents rise, moving from an adjustable loan to a fixed one, or extending the term.
Knoxville rentals inside the city pay city and county taxes, while homes outside the city pay county taxes only. Tennessee's 25% assessment ratio keeps the tax line moderate, which helps many refinances clear the ratio.
Tennessee charges a mortgage tax on the new loan, so include it in closing costs.
Use your actual tax bill rather than an estimate, and check whether a reappraisal is coming that could change it.
Start well before your current loan matures. Appraisals, title and payoff letters take time, especially with private lenders.
Seasoning rules vary by program. Some look at how long you have owned the property.
If your current lender is a private individual, ask early for the payoff process they prefer, and confirm who will sign the lien release.
We need the lease, proof of rent, the payoff statement, insurance and entity documents if the property is in an LLC. We do not need tax returns or pay stubs.
See our Tennessee rate-and-term page for statewide notes.
If the property is held in an LLC, include the operating agreement and confirm who is authorized to sign.
Call (877) 298-1001 or use the form below with the address, current balance, maturity date and rent.
Tell us whether the current lender is a bank, a private lender or a seller.
Yes. The new loan pays off the seller's note and releases their lien at closing, qualified on the property's rent.
Up to 80% LTV on some programs. Larger balances and 5-8 unit properties may have lower limits. The rent still needs to clear the 1.0x standard minimum on the new payment.
Yes. We need a payoff letter and the lender's cooperation on releasing the lien. Private lenders sometimes take longer to respond than banks, so request the payoff early.
It depends on seasoning rules, which vary by program. Some look at how long you have owned the property, others at how long the current loan has been in place.
A signed lease helps, and some programs require one. Others use the appraiser's market rent. A signed lease at market rent usually makes the file stronger and the appraisal easier to support.
No. Qualification is based on rent, credit and reserves.
No. Taxes are based on the county assessment, not the loan. A reappraisal can change them separately. The new loan amount does affect the Tennessee mortgage tax due at closing.
With five or more properties, a blanket portfolio loan can combine them. The portfolio qualifies on combined cash flow and has release provisions for future sales.
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