The Quick Read: Maryland taxes the new money in your refinance, not the debt you already owed. The county sets a rate per $500 of the taxable amount and rounds up to the next $500. The cash you take out, plus any costs or insurance premium you finance, is what pushes the new note past your old balance. The county, and whether you qualify for the refinance exemption, decide how big the charge gets.
This is a national article, and Maryland is the worked example. Many states tax a mortgage by the size of the loan. Maryland just makes the mechanics easy to see because each county sets its own rate. The same method applies elsewhere: size the loan, find the taxable slice, then ask what the local office charges.
Key Terms Defined
Recordation tax. A government charge on recording a deed of trust, based on the amount of the debt it secures. It is not a lender fee.
Transfer tax. A tax on moving ownership. On a refinance there is no change of owner, so the main charge is the recordation tax.
Deed of trust. The document that pledges your home as security for the loan. Maryland uses it in place of a mortgage in most files.
Face amount. The full dollar size of the new loan written on the note, including everything financed into it.
Unpaid principal balance. What you still owe on the loan being replaced. It leaves out interest and fees.
New money. The part of the new loan that exceeds the unpaid principal balance of the old one.
Original mortgagor. The borrower who first took on the debt being refinanced. The exemption depends on this status.
Cash-out refinance. A new loan that pays off the old one and hands you the extra equity as cash.
What an FHA Cash-Out Actually Does
An FHA cash-out replaces your current mortgage with a larger FHA-insured loan. The difference between the old payoff and the new loan, after costs, is the cash you receive. You can use that cash for any purpose.
Across the wholesale programs Lendmire places FHA files with, the program reaches up to 80% of the home’s appraised value. You must have owned and lived in the home for 12 months before the case number is assigned. The program is for your primary residence, so a rental or second home does not fit. Occupancy decides the leverage, and the standard FHA cash-out stops at your own home.
HUD lowered this cap in Mortgagee Letter 2019-11. The change was meant to match the cap on conventional cash-outs, as HUD’s announcement explained. If you see a higher cap in an older article, it is out of date.
The rest of the program sits in a tight envelope. The wholesale programs start at a 580 decision score. Ratios begin at 31/43 for housing and total debt with no compensating factors. Documented strengths can stretch them to 40/50 at the top tier. The upfront mortgage insurance premium is 1.75% of the base loan and can be financed. An annual premium follows, set by term, loan amount and loan-to-value. County loan limits apply to the loan amount. All of this is subject to lender guidelines and a full file review.
If you want to see the program on its own terms, start with Lendmire’s FHA cash-out refinance program page, then come back for the tax side.
Why Sizing the Note Sets the Tax
The recordation tax follows the size of the new note. So every dollar that goes into that note can matter, and the note holds more than your cash.
Here is what the new loan has to cover, in order:
1. The payoff of your existing mortgage.
2. Closing costs you choose to finance.
3. Any other debts you pay off at closing.
4. The FHA upfront premium, if you finance it.
5. The cash that goes to you.
Add those up and you get the face amount of the new deed of trust. The appraisal sets the ceiling. The 80% cap applies to the whole note, so everything financed uses up room under that cap.
That is the chain in one line: cap, payoff, financed costs, cash, face amount, taxable slice, county rate, rounding. The tax is the last link, and it feeds back into your net cash. A bigger charge either reduces what you get at the table or becomes a financed cost that grows the note.
The Refinance Exemption: Existing Debt Is Not Taxed Twice
Maryland’s rule starts from a fair idea. You already paid recordation tax when the old debt was recorded. A refinance that only swaps the lender should not trigger the tax again on the same debt.
So a refinancing mortgage is generally not taxed up to the amount of the unpaid principal debt secured by the existing mortgage. Only the amount above that is taxed. The state statute is Tax-Property Article §12-103, which applies the tax per $500 of the amount secured and lets Baltimore City and each county set its own rate. The exemption sits in a separate section, and counties put it into practice through their finance offices.
Three conditions matter in practice:
- You are the original mortgagor. The base is the new note minus your current principal balance, not minus the loan you took out years ago.
- The unpaid balance excludes interest and fees. County finance offices describe the exempt amount as the unpaid principal balance only.
- You sign an affidavit. Each refinance needs a sworn statement claiming the exemption. Some counties have their own form, so ask your title company which one applies.
Counties use their own wording, but the idea is the same. Howard County’s finance office, for example, publishes preferred deed language that includes the refinance affidavit.
How Counties Size Recordation Charges on an FHA Cash-Out Note
Counties calculate in five steps. You can run the same steps yourself to get a rough sense of the charge.
1. Find the face amount of the new note. Use the full loan, including financed costs and premium.
2. Subtract the unpaid principal balance you are replacing, if you qualify for the exemption. What is left is the taxable slice.
3. Round the slice up to the next $500. The Maryland State Bar Association’s recordation and transfer tax guide states the round-up rule.
4. Apply the county rate for each $500 increment.
5. Add anything the county layers on top, such as clerk surcharges or a separate county form fee.
Notice that the rounding is small. A slice that lands one dollar over a $500 line is charged as a full extra increment. That is a minor effect, but it is why estimates miss by a little.
Counties differ most in step four. The three common structures look like this:
| Structure | How it works | What to confirm |
|---|---|---|
| Flat rate | One rate for every $500 of the taxable slice | The current rate on the finance office’s page |
| Tiered by amount | The rate rises in steps as the amount grows | Which tiers apply to the slice, not the whole note |
| Multi-part | A base rate plus add-ons, such as a school increment | Each component, added together |
Montgomery County is the best-known example of the last two. The county’s tax has a base, a school increment and a premium that climbs on higher amounts. The county announced the higher brackets in its council update. That same release shows how wide the gap between counties runs. Frederick County sat at the top of the range and Baltimore County and Howard County at the bottom.
One caution on tiers: how a county’s higher brackets apply when only the new-money slice is taxed on a refinance is not always clear from published materials. Ask the county’s finance office or your title company before you count on a number. Rate lists also go stale, and published roundups can conflict with each other, so use the county’s own page as the final word.
Worked Examples in Percentages
These examples use percentages of the home’s value, not dollar amounts. They show how the taxable slice moves. They are modeled assumptions, not market data.
Example one: the standard case. Say your home appraises at a level where your current unpaid balance is 55% of value. You refinance at the 80% cap, and you are the original mortgagor on your primary residence. The new note is 80% of value. The taxable slice is about 25% of value. That slice covers your cash, your financed costs and your financed premium. The 55% you already owed is exempt.
Example two: less cash. Same home, same balance. This time you borrow only 70% of value. The taxable slice shrinks to about 15% of value. Take less cash, and the base shrinks by the same amount. Because the base moves one-for-one with the loan, the charge moves with it.
Example three: no exemption. Say you inherited the loan or are not the original mortgagor, and the county does not treat you as one. The taxable base can become the whole new note, not just the slice. At 80% of value, that is more than three times the base in example one. This is the case that surprises people most.
Now add the FHA premium. The upfront premium is 1.75% of the base loan, and financing it makes the note larger. A larger note means a larger taxable slice. The premium is a small piece next to the cash you take, but it is not zero. Counties tax the face amount, and a financed premium is part of that amount. Confirm with your title company how your county treats it.
Sensitivity: What Moves the Charge
Four things move the charge, in roughly this order of size:
- The cash you take. Every extra point of equity you pull adds a point to the taxable slice.
- The county. The rate gap between counties is far larger than any rounding effect.
- Your exemption status. Original mortgagor or not is a swing from slice-only to whole-note.
- What you finance. Closing costs and the upfront premium grow the note.
The cap works as a second limit. The 80% ceiling covers the whole note, so each financed cost leaves less room for cash. At the cap, a financed charge either shrinks your net cash or forces you to borrow less. If you are close to the cap, paying a cost out of pocket can preserve proceeds. That is a decision to run with the full numbers in front of you.
The tax is also a direct hit on proceeds when it is paid from the closing funds. A Howard County attorney’s answer, in a general forum, said lenders usually deduct it from proceeds and pay it to record. Treat that as a practical description, not a rule.
Where the General Rule Breaks
You are not the original mortgagor. The exemption depends on that status. Under the statute, a borrower who assumed the debt and paid recordation tax on the purchase counts as an original mortgagor. So does a trustee of a trust where the trustee or settlor incurred the debt. Howard County’s preferred language covers a revocable-trust refinance for this reason. The current statute is on the legislature’s site, and older text may differ.
A spouse joins the loan. Some secondary sources say adding a spouse to the original mortgagor does not cost you the exemption. Because that point comes from a secondary source, have your title company confirm it for your file.
A non-owner-occupied property. Maryland widened its refinance exemption to non-primary properties in 2013. That matters for other loan types. An FHA standard cash-out is for your own home only, so it is a side note here.
County transfer tax. The refinance exemption does not carry over to county transfer taxes in counties that charge them, such as Prince George’s. A refinance is not usually a transfer, so this seldom bites. Check anyway if your county has one.
An FHA Streamline instead of a cash-out. A Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit, and the mortgage insurance premium continues. It is not built to hand you equity. If you do not need cash, there is little or no new money to tax. That is a different product with different rules.
Your own timeline for eligibility. The 12-month ownership and occupancy test applies before the case number is assigned. HUD publishes narrow exceptions for specific cases, such as inherited homes, so ask rather than assume. Credit events carry HUD’s own waiting periods: two years from a Chapter 7 discharge and three from a foreclosure. Those are HUD rules, not a promise from any one lender.
How the Charge Shows Up at Closing
You will see the tax in the closing costs section of your Loan Estimate and Closing Disclosure. Where it lands is a small but real question. The CFPB’s rule on Loan Estimate closing costs says a charge based on the loan amount is a transfer tax for disclosure purposes, whatever the state calls it. By that logic, a Maryland recordation tax figured on your loan amount belongs under transfer taxes, not recording fees.
How a given title company labels it can vary, so look at a sample Closing Disclosure before you assume. This matters because disclosure rules treat the two buckets differently, and a figure that grows between estimate and closing can be a real issue.
The charge is not a lender fee. It is set by the county, and neither the lender nor Lendmire can waive it. A broker arranges the loan. The county sets the tax.
Here is what to ask your title company:
- Which county rate and tiers apply to my slice?
- Does the county use its own refinance affidavit?
- Is my financed upfront premium in the taxable base?
- Does the clerk charge any added surcharges on top?
- Can you send a written estimate before the Loan Estimate arrives?
The Decision in Practice
A homeowner weighing this loan usually has three questions on the table.
Do I need the full cash? The taxable slice moves with the cash. If you can do the project with less equity, you shrink both the loan and the charge.
Should I finance the costs or pay them? Financing keeps cash in your pocket today. It also raises the note, the taxable slice and your monthly obligation over the life of the loan. Paying costs out of pocket does the opposite. Neither is right for everyone.
Is cash-out the right tool? If your goal is a lower balance or a different term and you do not need cash, a rate-and-term FHA refinance reaches up to 97.75% on a primary residence you have occupied for the previous 12 months. A Streamline may fit an existing FHA loan. Each carries its own tax picture. A cash-out is the one that pushes the note, and so the taxable slice, upward.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. The county recordation charge is a separate closing cost, and your county’s finance office has the final word on it.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Availability depends on the state where the home sits, and every program figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Frequently Asked Questions
Do I pay recordation tax on my whole FHA cash-out?
Usually not. If you qualify for the refinance exemption, only the part of the new note above your unpaid principal balance is taxed. If you are not the original mortgagor, the base can be much larger, so confirm your status early.
Does the tax round up?
Yes. The taxable amount is rounded up to the next $500 before the county rate is applied. A slice a dollar over a line is charged as the next full increment.
Can I roll the tax into the loan?
Often, yes, if there is room under the 80% cap. Financing it raises the note, which raises both the taxable slice and your monthly obligation. Paying it at closing keeps the note smaller but uses your own cash or reduces proceeds.
Why does my neighbor in another county pay a different amount?
Because each county sets its own rate by local law. Some counties use one flat rate, some tier by amount, and some add components such as a school increment. The gap between the highest and lowest counties is wide.
Is the recordation tax the same as a recording fee?
No. A recording fee is a flat charge for filing a document. The recordation tax scales with the debt secured. For disclosure purposes, a charge based on loan amount is treated as a transfer tax, so check where it appears on your paperwork.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see FHA loan programs.
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References
1. HUD Mortgagee Letter 2019-11
2. HUD press release PR 19-114
3. Maryland General Assembly, Tax-Property §12-103
4. Montgomery County press release, Bill 17-23
5. CFPB, Regulation Z §1026.37
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA Cash-Out Recordation Costs for Owners in High-Cost Closing States · Can You Get a First FHA Cash-Out Before Probate Closes? · How Montgomery County Sizes Recordation Charges on an FHA Cash-Out
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.