A Kentucky DSCR loan is business-purpose financing on a 1-4 family rental, secured by a mortgage. Kentucky charges a flat $4 state tax on each mortgage recorded under KRS 142.010, and foreclosure runs through court-ordered sales.
Kentucky keeps the closing-table tax simple and the foreclosure process in the courts. Its landlord-tenant deposit rules apply only where a local government has adopted the uniform act, so the rental's city or county matters.
If a Kentucky rental sits near a river, check when flood insurance is required on a DSCR loan.
What tax applies to recording a mortgage in Kentucky?
Kentucky imposes a flat state tax of $4 on each mortgage recorded, under KRS 142.010(1)(c), and its real estate transfer tax exempts transfers made solely to provide or release security for a debt.
| Item | Kentucky rule |
|---|---|
| Recording a mortgage | $4 state tax per mortgage (KRS 142.010(1)(c)) |
| Deed transferring the property | Transfer tax of $0.50 per $500 of value (KRS 142.050) |
| Mortgage given as security only | Exempt from the transfer tax (KRS 142.050(7)(c)) |
Exception: County clerk recording fees are separate and not covered here.
According to KRS 142.010 and KRS 142.050, Kentucky General Assembly, as of October 2026.
How are rental property loans foreclosed in Kentucky?
Kentucky foreclosure sales are commonly court-ordered judicial sales that circuit court master commissioners help manage.
- The Kentucky Court of Justice describes master commissioners as helping manage judicial sales, most often court-ordered property sales such as foreclosures.
- Master commissioners assist circuit judges with these sales.
Exception: Sale procedures can differ by circuit. Check the local master commissioner's rules for a specific property.
According to the Kentucky Court of Justice, Master Commissioners, as of October 2026.
Does Kentucky limit prepayment penalties on rental property loans?
KRS 286.8-110(4) caps prepayment penalties at 3% in the first year, 2% in the second and 1% in the third, but it sits in the law governing consumer mortgage loans, so whether it reaches a business-purpose rental loan is not settled by the text.
- The cap declines from 3% to 2% to 1% over three years, with none after the earlier of the third anniversary or 60 days before the first rate reset.
- KRS 286.8-010(15) defines a mortgage loan for that subtitle as a loan primarily for personal, family, or household use.
Exception: Ask the lender whether it treats KRS 286.8-110(4) as applying to its business-purpose loans, and get the answer in writing.
According to KRS 286.8-110 and KRS 286.8-010, Kentucky General Assembly, as of October 2026.
Do Kentucky's security deposit rules apply to my rental?
Only where the city, county, or urban-county government has adopted the Uniform Residential Landlord and Tenant Act, because KRS 383.500 limits where the act, including the deposit rules in KRS 383.580, applies.
- KRS 383.580 sets deposit handling and return deadlines of 30 and 60 days in different situations.
- KRS 383.580 sets no cap on the deposit amount.
Exception: If the local government hasn't adopted the act, deposit terms come mainly from the lease. Confirm with the city or county.
According to KRS 383.580 and KRS 383.500, Kentucky General Assembly, as of October 2026.
Local guides for Kentucky: Louisville, Lexington.
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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.