Guide · Tennessee

Tennessee's transfer tax and mortgage tax at closing

Tennessee charges a 37-cent transfer tax and an 11.5-cent mortgage tax per $100 at recording, and the law puts both on the buyer. Here's the math on a first home.

The quick answer: Tennessee charges a realty transfer tax of $0.37 per $100 of the price or value, whichever is greater, and a mortgage tax of $0.115 per $100 of your loan after the first $2,000. Under state law the buyer pays the transfer tax and the borrower pays the mortgage tax, which on a $300,000 FHA purchase adds up to about $1,450.

Ever look at a closing disclosure and wonder what "recordation tax" means? In a lot of states the seller pays the transfer tax. Tennessee does it the other way around, so this one lands on you. It's not huge, but it's real money, and it surprises people who moved here from somewhere else.

Two taxes, one trip to the register of deeds

When your closing is done, the title company records two documents at the county register of deeds: the deed that puts the house in your name, and the deed of trust that secures your loan. Tennessee taxes both, under Tenn. Code Ann. § 67-4-409.

Tax	Rate	Based on	Who pays, per state law
Realty transfer tax	$0.37 per $100	The price or the value, whichever is greater	The buyer (grantee)
Mortgage (indebtedness) tax	$0.115 per $100	Your loan amount, minus the first $2,000	The borrower

The Tennessee Department of Revenue says the register of deeds collects both and sends them to the state. County registers may also charge a $1 fee for each tax receipt.

Running the numbers on a first home

Example only: say you buy a $300,000 house with a THDA Heroes FHA loan and 3.5% down.

Transfer tax: $300,000 divided by 100 is 3,000. Times $0.37 is $1,110.
Mortgage tax: the base loan is $289,500. With FHA's 1.75% upfront premium financed, the loan is about $294,566. Take off the first $2,000, divide by 100 and multiply by $0.115. That's about $336.
Together: roughly $1,450 before the small receipt fees.

A VA buyer with nothing down and the funding fee financed has a slightly bigger loan, so the mortgage tax is a few dollars more. A USDA buyer is in the same spot. The transfer tax doesn't change with the loan type at all.

What about the down payment loan?

Your Heroes Plus loan is a second mortgage with its own recorded document. Whether the mortgage tax applies to it, and who covers it, isn't something I could confirm from THDA's published materials. On a $15,000 second, the tax at the standard rate would be about $15, so it's small either way. Your closing agent will show it on the Closing Disclosure if it applies.

Can the seller pay it instead?

The law names the buyer, but money is money. You can write your offer to ask the seller for a credit toward your closing costs, and that credit can cover these taxes along with other fees. How much a seller can contribute depends on your loan type. VA, for example, caps seller concessions at 4% of the home's reasonable value. Your lender and agent can tell you what fits your loan.

When a house has been sitting, a seller credit is easier to get. In a neighborhood with three offers, asking for one may weaken yours. That's a judgment call for you and your agent.

Where these taxes sit on your paperwork

On the Loan Estimate your lender gives you within three business days of applying, look in the section for taxes and other government fees. You'll usually see the transfer tax and the mortgage tax listed with the recording fees. On the final Closing Disclosure, they show the exact amounts.

A tip: these amounts are set by statute, so they shouldn't change much from estimate to closing unless your price or loan amount changes. If they jump, ask why.

The other fees that ride along

These two taxes are just one slice of closing costs. The rest usually includes:

Lender fees. On a THDA first mortgage, reasonable and customary lender fees are capped at $1,800, and the down payment loan's settlement fee can be up to $200.
Title insurance and closing agent fees, which vary by company and price.
Recording fees charged by the county for the documents it records.
The appraisal and, if you order it, a home inspection.
Prepaids: your first year of homeowners insurance and the starting balance in your escrow account for property taxes.

Property taxes in Tennessee are a whole conversation of their own. Our property tax guide shows how a county bill is figured and why the escrow deposit varies so much by city.

Why the "value" part matters

The transfer tax is figured on the price or the value, whichever is greater. For most sales between strangers those are the same number. It matters in family deals. If your aunt sells you her house below market, the tax can still be based on the higher value. The buyer swears to the consideration or value when the deed is recorded, so your closing agent will ask.

Questions to ask your closing agent

Is the transfer tax figured on my contract price, or is a higher value being used?
Does the mortgage tax apply to my down payment loan as well as my first mortgage?
Which of these taxes is my seller credit covering, and what's left for me to bring?
When will I see the final Closing Disclosure? You're entitled to it at least three business days before closing.

Budgeting tip

When you're estimating cash to close on a Tennessee home, a quick rule of thumb is to set aside about half a percent of the price for these two taxes combined. On a $250,000 home that's around $1,200. Then let your Loan Estimate give you the real figure.

Heroes Plus or a city program may cover a good part of your closing costs, taxes included. Check your eligibility to see which options fit your county and job.

Things people ask

Who pays the transfer tax in Tennessee, buyer or seller?

Per the Tennessee Department of Revenue, the buyer (the grantee) pays the realty transfer tax. A seller can still agree to give you a credit toward closing costs.

How much is the Tennessee mortgage tax?

$0.115 per $100 of the loan amount, with the first $2,000 exempt. On a $294,566 loan that's about $336.

Is the transfer tax based on the price or the appraisal?

On the consideration or the value, whichever is greater. In a normal sale they're usually the same.

Can down payment assistance cover these taxes?

Often, yes, because they're part of closing costs. Your lender confirms how much of your Heroes Plus amount can go toward costs beyond the down payment.

Free printable: the Tennessee homebuyer checklist. Papers to gather, steps to follow, programs to ask about and questions for your lender, all on a single sheet. Grab the checklist