Tennessee investors in Nashville, Memphis, Knoxville and Chattanooga often buy with hard money and refinance once the rental is leased. A DSCR rate-and-term refinance replaces that short-term loan with long-term financing based on rent.
In short: Yes, LendingStreet offers DSCR rate-and-term refinances on 1-8 unit investment property in Tennessee, up to 80% LTV on some programs, qualifying on the property's rent instead of your income. It is the standard way to pay off a hard money, bridge or higher-rate loan and move into a long-term payment, with cash back limited to a small allowance. The rent has to cover the new payment at 1.0x on standard programs, the minimum credit score is 620, LLC borrowers are standard and loans start at $150,000.
With a rate-and-term refinance, the new loan pays off the old one and covers closing costs, and that is about it. You are not pulling equity out, so programs allow higher leverage: up to 80% LTV on some programs, versus up to 75% for cash-out. Any cash you receive at closing is capped at a small amount that varies by program.
Qualification runs on the property, not your income. The debt service coverage ratio compares monthly rent with the new payment, including taxes, insurance and HOA dues, and standard programs want at least 1.0x. You need a 620 or higher credit score, but no tax returns or W-2s, and the loan can close in your LLC on a 30-year term.
| Rate-and-term | Cash-out | |
|---|---|---|
| Max LTV | Up to 80% on some programs | Up to 75% |
| Cash to borrower | Small allowance only | Equity above payoff |
| Typical goal | Lower rate or payment, exit short-term debt | Pull equity for the next deal |
| Qualifies on | Rent (DSCR) | Rent (DSCR) |
Hard money and bridge loans are interest-only and short, and the clock keeps running after the work is done. The usual exit is a refinance into a DSCR loan once the property is leased, which turns a maturity date into a 30-year payment.
Tennessee's rental stock includes older single-family homes in Memphis and Chattanooga, newer suburban construction around Nashville in Murfreesboro, Clarksville and Spring Hill, and small multifamily and duplexes in Knoxville and Nashville's older neighborhoods.
Memphis has a large stock of older single-family rentals at lower prices. Some may not reach the $150,000 minimum loan size alone, so consider refinancing several together.
Tennessee charges a tax on recorded mortgages and deeds of trust based on the loan amount, and it can apply on a refinance depending on how the new loan is structured. Ask your title company for an estimate. Tennessee's transfer tax on deeds applies to sales, so a refinance usually avoids it.
Expect lender's title insurance, county recording fees and settlement charges in addition to the mortgage tax.
Get a written closing estimate early, since these items can usually be financed into the new loan as long as the total stays within the program's LTV.
Tennessee has no state income tax on wages, and property taxes are moderate. Counties reappraise on cycles, and recent reappraisals in the Nashville area raised values. Use the current bill. Storms and tornadoes can affect insurance quotes.
Lenders escrow these costs and count them in the payment, so an outdated tax bill or a stale insurance quote can make the ratio look better than it will be. Use current figures from the start.
This example is illustrative and not a quote. An investor bought and renovated a Knoxville duplex using a hard money loan that now has a payoff of $265,000 interest-only, or about $2,540 a month in interest. The property now appraises at $380,000 and rents for $2,700 a month, with taxes and insurance of about $520 a month.
A rate-and-term loan of $274,000 covers the payoff plus $9,000 of closing costs, which is about 72.1% LTV, inside the 80% limit some programs allow. On 30-year amortization, principal and interest is about $1,800, so the total payment is about $2,320 and the DSCR is about 1.16x, above the 1.0x standard minimum. The investor stops paying short-term interest and starts paying down principal, with no cash taken out.
| Item | Amount |
|---|---|
| Appraised value | $380,000 |
| Hard money payoff | $265,000 |
| Closing costs financed | $9,000 |
| New loan amount | $274,000 |
| Loan-to-value | About 72.1% |
| Principal and interest | About $1,800 |
| Taxes and insurance | $520 |
| Total monthly payment | About $2,320 |
| Monthly rent | $2,700 |
| DSCR | About 1.16x |
How soon you can refinance depends on the program. Some use the new appraised value right away, while others look at purchase price plus documented rehab costs until you have owned the property for a set period. Rate-and-term loans tend to be more flexible here than cash-out.
Rent is usually taken from the signed lease and checked against the appraiser's market rent estimate. A lease well above market may be cut back to the estimate, so price the lease realistically.
Nashville is the state's fastest-growing market, with higher prices and tighter ratios. Memphis has lower prices and strong rent relative to value. Knoxville and Chattanooga sit in between, and Clarksville has military demand from Fort Campbell.
Nashville restricts non-owner-occupied short-term rentals in many residential zones, and the Smoky Mountains near Gatlinburg and Pigeon Forge have a large vacation rental market. Confirm local rules before relying on nightly income.
Having these ready before you apply keeps the appraisal and underwriting moving.
Rate-and-term is the right tool when the goal is a lower, longer payment. If you want equity out, a cash-out refinance up to 75% LTV is the better fit. If a unit is still vacant, it often pays to finish leasing before you apply. On 5-8 unit buildings, maximum LTV can be lower and varies by program.
Yes. Our investor loans are business-purpose loans on non-owner-occupied property, and we offer DSCR rate-and-term refinances on 1-8 unit rentals across Tennessee, starting at $150,000.
It depends on the program. Some use the new appraised value soon after purchase; others base the loan on purchase price plus documented improvements until a seasoning period passes.
Standard programs look for 1.0x, meaning rent at least equals the full payment. Sub-1.0 programs exist for rentals that fall slightly short.
Tennessee taxes recorded mortgages and deeds of trust based on the loan amount, and it can apply on a refinance. Ask your title company for the figure.
Possibly, but Nashville restricts non-owner STRs in many zones. The permit status matters. If it cannot keep a permit, qualify on long-term rent.
No. The loan qualifies on the property's rent. You need a 620 or higher credit score, reserves and entity documents if you use an LLC.
Yes. LLC borrowers are standard. We will ask for the operating agreement, formation documents and good standing for the entity.
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