The Quick Read: On a cash-out refinance, the government charge for recording your new mortgage can hit the whole loan or just the new money. Which one depends on where the home sits and what paperwork gets filed. Maryland and the District of Columbia generally tax only the amount above your old loan balance, when you qualify and claim the exemption. Virginia taxes the whole new loan at a reduced refinance rate. The settlement agent confirms the final number, so ask early.
Key Takeaways
- Recordation tax is a government charge for recording your new mortgage. It is separate from your lender’s costs.
- Where an exemption exists, it covers the old balance and not the cash you pull out.
- The exemption is not automatic. Maryland and D.C. both require specific affidavits or forms.
- Virginia changed its approach years ago. Many online pages still describe the old rule.
- A smaller cash-out layer can mean a smaller tax bill in Maryland and D.C.
Maryland Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $375,000 home value, a $206,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical rates for Maryland. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
What Is Recordation Tax on a Refinance?
Recordation tax is a charge a state or district puts on the act of recording a mortgage or deed of trust in the public land records. It is not a lender fee. Lenders can’t waive it, and no lender can shop it down.
It also differs from a flat recording fee. A recording fee is a set charge for filing the document. Recordation tax scales with the loan amount.
Here’s the part many borrowers miss. A refinance usually doesn’t transfer ownership, so there is typically no transfer tax. The tax in play is the one on the new mortgage itself.
This is a national explainer, but the tax is local. Maryland, D.C. and Virginia are the three examples because their rules differ in ways that change what you pay. Other states have their own versions, and the principle carries over: find out what base the tax uses.
How a Cash-Out Refinance Works First
Before the tax, you need the loan. A cash-out refinance replaces your existing first mortgage with a larger one. The difference comes to you as cash.
Across the wholesale programs Lendmire places consumer files with, conventional cash-out on a one-unit primary residence generally tops out at 80% of the home’s value. Two- to four-unit primary residences, second homes and investment properties generally top out at 75%. Those are program guidelines, subject to lender review and your full file. Nothing here is a commitment to lend.
If you are weighing equity access, Lendmire’s cash-out refinance programs page lays out how the loan types compare.
Rate-and-term refinances work differently. They pay off the existing first mortgage and closing costs, with only incidental cash back. They can go as high as 95% of value on a one-unit primary residence. The tax treatment can differ too, because less new money means less taxable layer.
How the Loan Gets Underwritten, Step by Step
The recordation tax comes late in the process. But the steps before it decide how large the tax base ends up.
1. The loan is classified. Underwriting decides whether you are doing a limited cash-out or a true cash-out. Paying off certain second liens or taking more than the permitted cash back moves you into cash-out. The Fannie Mae Selling Guide treats these as separate categories with different pricing and stricter rules.
2. Seasoning is tested. The mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months. Exceptions exist for delayed financing, inheritance and legal awards.
3. Value is confirmed. A cash-out typically needs a new appraisal.
4. Your finances are checked. The wholesale conventional programs start at a 620 decision score. Most files run through automated underwriting with a total debt ratio ceiling of 50%. Fannie Mae’s guide adds six months of reserves when the ratio exceeds 45% on automated files.
5. Title and payoff are ordered. The settlement agent gets the exact unpaid principal on your existing loan. This number matters more than any other for recordation tax.
6. The tax is computed. The agent applies the jurisdiction’s rule to the new loan and the old balance.
7. The paperwork is prepared and recorded. Affidavits, forms and recitals go in with the mortgage.
Notice that steps five through seven are not the lender’s call. The title or settlement agent runs them. A good agent can save you real money here, and a careless one can leave an exemption unclaimed.
Maryland: Only the New Money, If You Claim It
Maryland’s rule is the one borrowers find most helpful. A refinancing mortgage is not taxed to the extent it secures an amount no greater than the unpaid principal on the existing mortgage. That language comes from Maryland’s Tax-Property Article §12-108.
So on a cash-out, you owe the tax only on the amount above the old principal. The first layer is exempt. The cash-out layer is taxed.
Three details trip people up:
- The exemption belongs to the original mortgagor. It extends to a spouse and to the settlor of a living trust. Someone who bought a home and assumed the seller’s loan doesn’t automatically qualify. The statute covers an assumptor only in specific circumstances, tied to recordation tax paid on the purchase.
- It is not automatic. You claim it with a sworn statement or affidavit. The affidavit states that you are the original mortgagor, whether the property is your principal residence, and the unpaid principal amount.
- “Unpaid principal” means principal only. Baltimore City Finance says it does not include interest, costs or fees. If your payoff includes more than principal, only the principal portion gets the exemption.
Maryland originally limited this exemption to principal residences. A later change widened it to other property types, per law firm summaries. Check current text with your settlement agent before assuming either way.
Counties add procedure. Prince George’s County, for example, has its own Finance Affidavit. The county collects the state’s tax, but the state sets it. Separately, law firm summaries note the refinance exemption is not mirrored for county transfer taxes where those apply, which matters only if your transaction involves a transfer.
District of Columbia: Same Borrower, Same Property
D.C. follows a similar principle with stricter conditions.
The old balance is exempt only if tax on it was paid or it was exempt to begin with. If tax was due and never paid, it gets collected at the refinance.
To count as a refinance in D.C., the new loan must go to the same borrowers, on the same real property. That creates two edge cases:
- A different borrower fails the test. Remove or add someone and the transaction may stop looking like a refinance. Talk to your agent before changing who is on the note.
- Added collateral is different. Adding a property to the security can still qualify, but you can’t release a property that secured the old loan.
On paperwork, the Recorder of Deeds requires Form FP-7/C. D.C.’s Recorder of Deeds FAQs say a residential deed of trust needs that form, plus a Class 1 Security Affidavit if you claim an exemption. A separate form goes in for each deed of trust, and the exempt and taxable amounts are entered separately.
One caution. A lender blog or two claims D.C. has no tax at all on refinances. That doesn’t match the District’s own guidance, which describes a tax on the new-money layer. Rely on the District’s own guidance and your settlement agent.
Also watch modifications. Check current wording before you restructure your existing loan instead of refinancing it.
Virginia: A Reduced Rate on the Whole Loan
Virginia works differently, and old information is everywhere.
The base tax is set in Virginia Code §58.1-803. That statute also has a separate, lower schedule for refinancing deeds of trust where tax was already paid on the existing debt. The instrument must certify the book and page of the recorded deed on which tax was paid.
Here’s the myth to retire. Under the old rule, a borrower who refinanced with the lender that held the existing loan owed no tax on the existing debt. A borrower who refinanced with a different lender got no such treatment.
That exemption ended. A 2012 law replaced it with a reduced rate on the whole refinance, effective July 1, 2012, as a title underwriter’s memo describes. The practical result:
- The reduced rate applies to the entire new obligation, not just the cash-out layer.
- Switching lenders no longer costs you an exemption, because there isn’t one to lose.
- Total loan size matters more than the size of your cash-out.
Virginia localities also impose their own recordation tax. Ask your settlement agent for the combined total. Lendmire’s consumer lending is licensed in Virginia, so a Virginia homeowner can compare programs there, but the tax still comes from the state and locality, not from any lender.
Side by Side: Three Jurisdictions
| Factor | Maryland | D.C. | Virginia |
|---|---|---|---|
| What is taxed on cash-out | New money above old principal | New money above old principal | Whole loan, reduced refinance rate |
| Borrower test | Original mortgagor | Same borrower, same property | None for rate |
| Paperwork | Affidavit or recital | FP-7/C plus Class 1 affidavit | Certification of prior deed |
| Prior tax matters | Not required | Old balance exempt if taxed or exempt | Must show tax was paid |
| Who sets the rule | State, collected by counties | District | State plus local |
One Scenario, Three Answers
Run the numbers on a shared example, with everything in percentages. Say your home is worth a given amount. You take a new cash-out loan at 80% of that value, the most conventional guidelines generally allow on a one-unit primary residence. Your existing mortgage principal is 60% of value.
That makes the cash-out layer 20% of the home’s value. Put differently, one quarter of the new loan is new money.
- Maryland: with the affidavit filed and you as the original mortgagor, the tax lands on that one quarter. The other three quarters are exempt.
- D.C.: same borrower and property, and prior tax paid or exempt? Then the tax lands on the same one quarter.
- Virginia: the reduced refinance rate applies to the entire new loan.
That doesn’t mean Virginia costs more in every case. Each jurisdiction has its own rate, and the rates differ. The point is the base. In Maryland and D.C., a smaller cash-out shrinks the taxable layer. In Virginia, a larger loan is a larger base regardless of how much you take out.
Where the General Rule Breaks
Rules of thumb fail at the edges. Watch for these.
Free-and-clear homes. If you own your home outright, a new mortgage counts as cash-out under Fannie Mae’s guide. With no existing debt, there is no prior balance to exempt. For recordation purposes, the whole loan is new money. Confirm this treatment for your jurisdiction.
Streamlines are not cash-out. The government streamlines are built for lowering a payment, not for pulling equity. The HUD Streamline page says FHA Streamline applies only to an existing FHA-insured mortgage, with limited credit documentation and underwriting. HUD notes “streamline” refers to the lender’s process, not an absence of costs, and closing costs can’t be added to the new mortgage amount. The VA IRRRL is limited to existing VA loans and doesn’t produce cash out. A VA cash-out refinance is the route for tapping equity on a VA loan.
Second homes and investment properties are eligible loan types, but occupancy sets the leverage. Our parameters show 80% for a one-unit primary residence and 75% for second homes and rentals. Some state exemptions have also turned on whether the property is your principal residence, so check.
Fannie Mae offers a delayed financing exception to the six-month ownership clock.
How the Tax Shows Up on Your Paperwork
Government charges appear on the Closing Disclosure under Other Costs. The Loan Estimate and Closing Disclosure forms separate flat recording fees from charges based on the loan amount or sale price. A charge scaled to the loan amount is treated as a transfer tax on the form, not a recording fee.
That distinction matters if you’re comparing a Loan Estimate to your final disclosure. A tax built on the loan amount can be categorized differently than a flat recording fee, and different categories have different rules about how much they may change between the two forms. Ask the settlement agent how your jurisdiction’s tax is categorized.
Compare the two documents line by line. If the recordation line jumped, ask why. A missing exemption affidavit is a common culprit.
Closing-Day Checklist
Bring these questions to your title or settlement agent:
- What is the exact unpaid principal on my existing loan?
- Am I the original mortgagor, or did I assume this loan?
- Was recordation tax paid on the existing loan?
- Which affidavit or form do you file, and who signs it?
- Does the county or locality add anything on top?
- How is the tax categorized on my Closing Disclosure?
If the answers feel vague, press for specifics. The paperwork is routine for experienced agents.
Common Mistakes and Myths
1. “Cash-out means tax on the whole new loan.” True in Virginia at the reduced rate. Not generally true in Maryland or D.C. for qualifying borrowers.
2. “Virginia exempts same-lender refinances.” That was the old rule, and it ended in 2012.
3. “The exemption just applies.” It doesn’t. Affidavits and forms claim it.
4. “The exemption covers my original loan amount.” Maryland exempts only unpaid principal at the time of the refinance.
5. “A streamline has no costs.” HUD says otherwise.
6. “Recording fee and recordation tax are the same.” One is flat. The other scales with the loan.
7. “A tax paid on my deed covers my mortgage.” Deed and mortgage taxes use different bases. Don’t assume one covers the other.
What the Decision Looks Like in Practice
For most borrowers, the recordation tax won’t decide whether to refinance. It is one cost among several. But it can shape how much you take out.
In Maryland or D.C., trimming cash-out shrinks the taxable layer. In Virginia, the loan’s total size sets the base. In every case, a seasoning or ownership clock can block a cash-out even when you have plenty of equity. Check those before you plan.
Tax treatment of the cash itself is a separate matter. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Keep the rules above in mind, but let the settlement agent confirm the numbers. Program details change, and so do local tax rules.
Key Terms Defined
Recordation tax: A state, district or local charge for recording a mortgage or deed of trust in the public land records.
Original mortgagor: The person who first took out the loan, which in Maryland can include a spouse and the settlor of a living trust.
Unpaid principal: The balance still owed on a loan, not counting interest, fees or costs.
Seasoning: The waiting period a loan or ownership must meet before a cash-out refinance is allowed.
Limited cash-out refinance: A refinance that pays off the existing first mortgage and closing costs with only incidental cash back. Also called rate-and-term.
Security instrument: The recorded mortgage or deed of trust that pledges the home as collateral.
Frequently Asked Questions
Do I pay recordation tax on my whole loan in Maryland?
Usually not. On a qualifying refinance, Maryland taxes only the amount above your existing unpaid principal. You must claim the exemption with an affidavit, and it generally applies to the original mortgagor. Without the paperwork, the tax can land on more of the loan.
Does D.C. tax a cash-out refinance?
Yes, on the new-money layer. D.C. taxes the amount by which the new loan exceeds the old principal balance, when the borrowers and property stay the same. The exemption on the old balance depends on tax having been paid or exempt. Filing the correct recorder forms is part of getting the treatment right.
Does switching lenders change my Virginia tax?
Not anymore. Older rulings described a same-lender exemption, but Virginia replaced it in 2012 with a reduced rate on the whole refinance. The lender you choose doesn’t change the tax. The loan size and your locality’s charges do.
Can I avoid the tax by doing a streamline refinance?
A streamline isn’t a cash-out product, and it isn’t cost-free. FHA Streamline needs an existing FHA loan and doesn’t let you roll closing costs into the new loan. The VA IRRRL applies to existing VA loans and doesn’t provide cash out. Recording charges can still apply to either.
Who should I ask to confirm the exact number?
Your settlement agent or title company. They prepare the affidavits and compute the tax for your jurisdiction. Ask for the figure before closing and compare it to your Loan Estimate. Lendmire, as a mortgage broker, can help you compare programs, but program figures are subject to lender guidelines and full file review.
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.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-03
2. Maryland Tax-Property Article §12-108
4. Title underwriter memo VA-2012-002
5. HUD
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much More a Cash-Out Refinance Costs on a Condo · Cash-Out Refinance Delayed Financing Rules for a Second Home · Is a Cash-Out Refinance Worth It for a Small Sum?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.