The Quick Read: What recordation costs on this loan depends on who is on the note and what secures it, not only on how big the loan is. For an owner-occupied home with four or fewer units, the District’s rules point to a refinance that is largely exempt, with a flat recording fee and a signed affidavit. If the exemption does not apply, the tax lands on the new money above the old balance, not on the whole loan. Your title or settlement agent confirms which regime fits your file.
Key Takeaways
- Recordation tax is a District tax on mortgages and deeds of trust. A mortgage is not hit by transfer tax, which belongs to a sale.
- On a qualifying refinance, the tax reaches only the new debt above the old principal balance, not the full loan.
- Jumbo status changes how the loan is underwritten. It does not create a different tax.
- The tax follows the paperwork: same borrowers, same property, and proof that the old debt was taxed or exempt.
- Ask the settlement agent to confirm how the tax applies to your specific file before you plan around any number.
What Recordation Tax Is (and Isn’t)
Recordation tax is a charge for putting a mortgage or deed of trust on the public record. The District applies it to the loan document itself. Transfer tax applies to the deed when a home is sold.
People mix the two up constantly. A refinance has no sale, so it has no transfer tax. A mortgage is subject only to recordation tax.
Two different charges also hide behind the word “recording.” One is a flat government fee for filing the document. It stays the same whether the loan is large or small. The other is a percentage-based tax tied to loan amounts. Only the second one grows with a jumbo balance.
That difference matters more on a large loan. A flat fee barely moves the closing bill. A percentage tax on a big balance can be a real line item. So the first question is never “how big is the loan?” It is “what exactly gets taxed?”
Does Jumbo Status Change the Tax?
No. Jumbo status comes from loan size, and the tax comes from the instrument and the debt amounts.
A loan is a jumbo when it exceeds the conforming limit set for the area and the number of units. The Federal Housing Finance Agency sets a baseline limit and a higher ceiling for high-cost areas, which is 150 percent of the baseline. A large D.C. loan can still land above that ceiling. This page leaves out the dollar limit, because it changes yearly.
Jumbo status changes underwriting. Across the wholesale programs I place jumbo files with, the headline lane starts at a 660 decision score. Leverage reaches 90% on the purchase side, though cash-out sits at lower leverage than purchase. Loans run up to $5,000,000 on the largest lanes, and the largest lanes also put a cap on the cash you can take out. Every figure here is subject to lender guidelines and full file review.
The loan structures vary by lane. Some are fixed, some adjustable, and some interest-only. The debt-to-income ceiling is 50% on the fixed lanes, 45% on the adjustable lanes, and 43% on the interest-only lanes. Reserves are counted in months of the full payment, and they rise with the loan amount. Above a lane’s threshold, expect two appraisals.
That is the world of Lendmire’s jumbo cash-out refinance program. It is not a different tax code. D.C. is the worked example here. Whether a program is available depends on the state where the home sits.
How a Jumbo Cash-Out Is Underwritten, Step by Step
The recordation question sits inside a larger process. Here is how a file moves.
1. Occupancy and purpose. The lender confirms you live in the home and that the loan is a cash-out. Occupancy decides leverage. A primary home gets different limits than a second home.
2. Credit and ratios. The lender pulls credit and checks your debt-to-income against the lane’s ceiling. A higher score and a lower ratio give the file more room.
3. Appraisal. The value sets your loan-to-value (LTV), the loan as a percentage of what the home is worth. Larger loans may need two appraisals. The appraisal drives eligibility. It does not drive the tax, which keys off the new loan’s face amount and the old balance.
4. Reserves. You show months of payments in liquid funds after closing. The count rises with the loan size.
5. Payoff and title. The title company pulls the existing mortgage balance and builds the payoff. This step feeds the recordation math directly.
6. Disclosure. The Loan Estimate shows your projected costs. You compare it line by line against the Closing Disclosure.
The seasoning tests deserve a mention. Conventional cash-out rules set out in the Fannie Mae Selling Guide call for the new loan to pay off the existing mortgage on the same property. The guide also asks for an existing first mortgage that is at least 12 months old and at least one borrower on title for six months. Jumbo lanes set their own tests, so treat those as a reference point, not as the jumbo rule.
How the District Taxes a Refinance
The core rule is simple. When you refinance, the tax applies only to new debt above the existing principal balance. That holds if the existing debt was a purchase-money loan or was already taxed. The D.C. Code states it that way, and the District’s tax office says the same in its refinance and modification notice. A refinance instrument is taxed on the excess of its face amount over the principal due on the old debt.
So the taxable base is a subtraction. New loan amount, minus the old principal balance. Nothing more.
The rule has conditions. Four of them decide most files:
- Same borrowers. Under the notice, a new loan counts as a refinance only if it is made to the same people who owed the loan being paid off.
- Same property. The new loan must be secured by the same real property. No collateral from the old loan can be released.
- Old debt taxed or exempt. The old balance gets credit only to the extent tax was paid or the debt was exempt.
- Proof. The settlement agent has to substantiate the old balance. Without proper proof, the notice warns that tax can be imposed on the outstanding balance.
The paperwork follows. For an owner-occupied home, the residential deed of trust is recorded with a recorder-of-deeds form, plus a Class 1 security affidavit if an exemption is claimed. Your title agent prepares those.
The 1.45% Figure Everyone Quotes
Here is where the confusion starts. The statute taxes a security instrument at a set percentage, with a reduced treatment for certain residential properties under a price threshold. That number gets repeated online as a flat share of “your loan.”
That reading is mostly a misreading. The statute and the District’s own notice apply the rate to the taxable amount. On a qualifying refinance, that means the new money, not the whole balance.
Accounts of how recordation tax applies to owner-occupied homes vary, and the differences usually come down to the type of property and loan being described. Some title-company guidance says a Class 1 refinance owes only the clerk’s fee, with an affidavit, while a refinance outside Class 1 is taxed at 1.45% of the loan amount. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. Title-industry summaries note that an exemption for residential refinances under five units remains in place. Those descriptions are not necessarily in conflict, since they may address different situations, such as owner-occupied versus non-owner-occupied property or different loan types.
So don’t plan around “zero” or “1.45% of the whole thing.” Plan around the facts: a residential exemption exists, it requires an affidavit, and the outcome turns on whether your home and borrowers qualify. The settlement agent confirms that. Treat the rules as a snapshot and verify them with the Recorder of Deeds and your title company before closing.
A Worked Example, in Fractions
No dollar figures here, because the logic holds at any size. Think in slices of the new loan.
Scenario A: exemption does not apply, old debt was taxed. Say you own a home with the same borrowers on the old and new notes. The old mortgage was taxed or exempt when it was recorded. You take a new jumbo that pays off the old loan and adds cash. Suppose the old balance is about two-thirds of the new loan. The remaining third is the cash-out. The tax, if it applies, reaches that remaining third. The paid-off two-thirds gets credit.
Scenario B: the Class 1 exemption applies. Same home, same borrowers. The home is owner-occupied with four or fewer units, and the settlement agent files the affidavit. Per the title sources above, the result may be just the flat recording fee. The size of your cash-out does not move the tax in this case.
Scenario C: the old debt was never taxed. Suppose tax was due on the old loan and never paid. The credit shrinks to the part that was actually taxed or exempt. If tax was due but unpaid, that portion is taxed when the refinance is recorded. The taxable slice grows, and it could be larger than your cash-out. Your title agent checks this early, and you should ask.
One more point. A bigger cash-out request raises the taxable slice in Scenarios A and C. It also raises your LTV, which affects eligibility and may take you nearer a lane’s cash cap.
Side by Side: What Gets Taxed
| Transaction | What is generally taxed |
|---|---|
| Rate/term refinance, qualifying | Little or none beyond the flat fee |
| Cash-out refinance, qualifying | New money above the old balance, unless exempt |
| New second lien (home equity line) | A new instrument, so ask the title agent |
| Purchase loan | Exempt to the extent it funds the acquisition |
| Modification or restatement | Deemed a refinance of the whole debt |
The second-lien row is where I’d slow down. A second lien is a new loan, not a payoff and replacement. Treatment can differ, so don’t assume it matches a cash-out.
Where Cases Break the Rule
The general rule has some sharp edges.
Changing who is on the note. Removing a spouse after a divorce, adding a borrower, or moving the home into a trust can break the refinance status. The notice requires the same obligors. Flag them for the title agent before you apply.
Releasing or swapping collateral. The same real property has to secure the new loan, and the old collateral can’t be released.
Modifications. The District treats an amendment, modification or restatement as a deemed refinance of the entire debt. A modification does not dodge the tax. Amounts advanced to the borrower in the prior 12 months count.
Co-ops and bigger buildings. One- to four-unit owner-occupied homes are the usual residential case. Co-ops, larger buildings and commercial property follow different treatment. If your property isn’t a straightforward one- to four-unit home, get the answer in writing first.
The first-time-buyer reduction. The reduced deed rate is a purchase-side program. It isn’t the refinance answer.
Other jurisdictions. Rules differ widely. Some states tax the full new loan. Others exempt the refinanced amount up to the unpaid principal for qualifying borrowers. Maryland and Virginia, for instance, each handle it their own way. Never carry a D.C. assumption to another state.
Where It Shows Up on Your Closing Documents
Start with the Loan Estimate, page 2, section E. Government recording charges appear there and again on the Closing Disclosure.
Here is the catch. Federal rules look at how a charge is calculated, not what local law calls it. A fee based on loan amount is treated like a transfer tax. So a percentage-based recordation tax likely sits in the transfer-tax line, not the flat recording-fee line. Ask the lender or title agent which line your charge sits in.
Also, recording charges and certain other settlement services generally can’t rise by more than 10 percent in total between the estimate and closing. Percentage-based transfer taxes can sit in a stricter bucket. I’d treat that as a prompt to ask questions, not as a promise.
Compare both documents line by line. That is where a recordation surprise shows itself.
What the Decision Looks Like in Practice
Picture a borrower with a large mortgage, a lot of equity, and a plan to pull cash out for a renovation. The decision comes in a few passes.
First, the structure. Do the same people stay on the note? Does the same home secure the loan? If yes, you likely sit in refinance treatment. If a name changes, pause.
Second, the size of the cash-out. A larger draw raises LTV and the cash cap may start to matter. If the tax applies to new money, it grows with the draw. Draw only what the project needs.
Third, the costs. Some borrowers finance closing costs into the new loan when leverage allows. That raises the balance, and with it the monthly obligation. A “no-closing-cost” refinance is a marketing phrase, not a free loan. The costs are folded into the balance or the pricing, and the tax is one of them.
Fourth, the alternative. Compare the cash-out with keeping your current loan and using a separate second lien. A second lien keeps your existing loan in place. The tradeoff is a second payment and a different tax question.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Jumbo loan: A mortgage above the conforming loan limit for the home’s county and unit count.
Cash-out refinance: A new, larger mortgage that pays off the old one and hands you the difference in cash.
Recordation tax: A District tax on recording a mortgage or deed of trust, separate from transfer tax.
Obligor: The person who owes the loan. Refinance treatment generally requires the same obligors on the old and new notes.
Principal balance: What you still owe on the old loan, excluding future interest. It is the amount subtracted before tax is computed.
Class 1 security affidavit: A sworn form filed with the recorder when claiming the residential refinance exemption.
Seasoning: The waiting period a lender wants between buying or refinancing and the next cash-out.
Frequently Asked Questions
Is my jumbo cash-out taxed on the full loan?
Usually not. On a qualifying refinance, the statute taxes only the new debt above the old principal balance. Some sources describe a flat fee only for owner-occupied homes with an affidavit. The full-loan reading tends to come from a misreading of the deed-sale rates. Your settlement agent confirms how your file is treated.
Do jumbo loans carry a higher recordation rate than smaller ones?
No. The tax is tied to the instrument and the debt amounts, not to jumbo status. A bigger loan can mean a bigger taxable base when the tax applies. The rate itself does not change because the loan is a jumbo.
What if the tax on my old mortgage was never paid?
Expect it to cost you. The credit for the old balance covers only the part that was taxed or exempt. Any portion where tax was due but unpaid gets taxed when the new loan is recorded. Ask the title agent to check the old recording early.
Is recordation tax the same as transfer tax?
No. Transfer tax belongs to a deed in a sale. A mortgage or deed of trust is subject only to recordation tax. A refinance has no sale, so no transfer tax applies.
Does a loan modification avoid the tax?
No. The District treats a modification, amendment or restatement as a deemed refinance of the whole debt. Amounts advanced in the prior 12 months count. A modification is not a way around the tax.
Getting a Straight Answer on Your Own File
Your best move is to ask for the answer in writing before you commit. Ask the title or settlement agent which regime applies, which line it sits on, and what proof of the old debt they need. 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. D.C. rewards the borrower who asks the tax question before the cash-out question.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see jumbo loan programs.
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References
1. FHFA – 2026 Conforming Loan Limit Values
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. D.C. Office of Tax and Revenue, Tax Notice 2023-04: Taxation of Refinances and Modifications
This article is part of Lendmire’s Jumbo Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Jumbo Cash-Out Refinance Seasoning Rules After a Recent Purchase · Does a Divorce Buyout Count as a Jumbo Cash-Out Refinance? · 5 Myths About Jumbo Cash-Out Refinance Costs and the Payment
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.