The Quick Read: On a refinance, the county taxes only the new money, meaning the part of the new loan that is larger than the principal you still owe on the old one. A jumbo cash-out in Maryland’s Montgomery County is not taxed on the full balance. The tax per $500 climbs in steps, so the size of your cash-out matters more than the size of your loan. Exactly where your taxable slice lands in those steps is a point to confirm with your title company before you sign.
Jumbo cash-out estimate
Enter the value, the balance, and the cash wanted; choose the occupancy and the structure; the lanes, the payment, and the reserves follow.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a jumbo cash-out refinance quote.
Illustrative starting assumptions: a $2,000,000 home value in the jumbo range, a $1,000,000 current balance, a principal residence on a thirty-year fixed structure at the current Freddie Mac conforming benchmark, and property taxes and insurance estimated at typical national rates. 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 conforming benchmark, a market reference and not a jumbo cash-out refinance quote; a jumbo loan is priced by the lender at lock. The lanes shown are the wholesale cash-out lanes behind this page as of the snapshot date; the calculator reads each lane’s leverage, loan maximum by occupancy, cash-in-hand cap, and reserves as the lane table states them, and a Lendmire loan officer confirms the lane on the file. The cash available is the loan the lane allows less the balances paid off, before closing costs, which are not included; on most lanes a jumbo cash-out begins one dollar above the conforming limit for the county, and two lanes start at a stated dollar floor instead. The HELOC line is the line 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.
This article uses Montgomery County as a worked example of a rule that applies well beyond Maryland: a local tax on new debt can change what a cash-out costs. If your home is somewhere else, the mechanics carry over. The county and the numbers do not, so check your own.
Key Takeaways
- The tax hits the increase in debt, not the whole new loan.
- The exemption follows the balance you owe today, not the original loan amount.
- Rates step up above certain slices, so a bigger cash-out can cost more per dollar of new money.
- The tax is the same whichever lender you choose. Compare lenders on what they control.
- Ask your title company for the county’s own computation. Do not rely on a rule of thumb.
What Is Recordation Tax, and Why Does a Refinance Trigger It?
Recordation tax is a one-time government charge for putting a new mortgage on the public land record. It is not a fee for typing a document into a database. It is a tax tied to the amount of debt being recorded.
Montgomery County’s Council packet on Bill 17-23 says the tax is levied under the Maryland Tax-Property Code. On a refinance, it applies to the part of the new principal that is greater than the principal remaining on the original debt. The county staff report on the same bill describes it the same way.
So a refinance that only swaps one loan for another, with no extra borrowing, has little or nothing to tax. A cash-out has a taxable slice by definition. You are borrowing more than you owe.
Transfer tax is a separate animal. It applies when a deed changes hands. A cash-out refinance does not move the deed, so a standard refinance does not usually trigger it. Rules for the county’s own transfer tax can differ, so ask your title company to confirm.
The Formula: Four Steps From Payoff to Taxable Slice
Here is how the number gets built. Walk through it with your own loan figures.
1. Find the payoff. This is the unpaid principal on your existing mortgage at the time of the refinance. It is not what you borrowed originally.
2. Set the new loan amount. That includes your cash-out and anything you roll in from closing costs.
3. Subtract. New loan minus payoff equals the taxable slice.
4. Apply the county’s tax per $500 to that slice, rounding up to the next $500.
The exemption comes from Maryland Tax-Property §12-108. It covers the part of a refinance loan that does not exceed the unpaid principal balance of the existing loan. The statute also requires an affidavit. The signer states that they are the original mortgagor, or that mortgagor’s agent, and states the unpaid principal being refinanced. Some counties add their own certification form.
That paperwork matters. The payoff figure on the affidavit sets the base. A wrong payoff means a wrong tax.
Two quiet traps sit inside this formula:
- Paying down principal shrinks your exemption. The smaller your payoff, the larger the taxable slice for the same new loan amount.
- Rolling costs into the loan grows the slice. Every dollar financed beyond the payoff counts as new money, including the tax itself.
How the Tax Steps Up
The county’s tax is built from three pieces. Per a law-firm alert from Nelson Mullins, the base is $2.08 per $500. A school increment adds $2.37 per $500. A premium of $2.30 per $500 applies above $500,000. Bill 17-23 left the base and school pieces alone and raised the premium in tiers.
The law firm Gordon Feinblatt converts those pieces into combined marginal figures. Here is what they look like side by side:
| Slice of taxable amount | Tax per $500 | Effective on that slice |
|---|---|---|
| Up to $500,000 | $4.45 | 0.89% |
| $500,000.01 to $600,000 | $6.75 | 1.35% |
| $600,000.01 to $750,000 | $10.20 | 2.04% |
| $750,000.01 to $1,000,000 | $10.78 | 2.156% |
| Above $1,000,000 | $11.35 | 2.27% |
The first row is the base plus school pieces added together, which is $2.08 plus $2.37. The effective figure is simply $4.45 divided by 500.
“Marginal” is the key word. Each tax figure applies only to the slice of value inside its bracket, the same way income tax brackets work. It is not a flat percentage on the whole amount. Anyone telling you “it’s about 1%” is giving you a rule of thumb that fails at higher amounts.
These are figures from secondary legal sources. Check them against the county’s own rate table before you plan around them. Pages that still show older figures are easy to find, so look at the effective date of any table you use.
Where Your Jumbo Cash-Out Lands in the Table
A jumbo loan starts one dollar above your county’s conforming limit. This article does not quote that limit, since it changes from year to year and varies by county. Look up your county’s current limit on the FHFA list.
Here is the important separation. Loan size sets your product. The taxable slice sets your recordation tax. A large jumbo balance can carry a small taxable slice if most of it replaces your old loan.
Picture three homeowners with the same house and the same existing balance:
- No cash-out. The new loan equals the payoff. The taxable slice is close to zero, apart from anything you roll in.
- Modest cash-out. The new money is a small share of the new loan. It is taxed mostly at the lower tiers.
- Large cash-out. The new money is big enough to reach the higher brackets. More of it is taxed at the steeper figures.
Which tier the taxable slice starts in is not something this article can state for certain. The brackets themselves are marginal, meaning each tier applies only to the portion of the amount that falls within it. How a refinance’s taxable slice is slotted into those tiers is a question for the county.
The way the taxable slice is computed can change the bill noticeably on a large file, so treat any estimate with caution. Ask your title company for the county Finance computation on your actual loan. Do not plan around a worked example from a blog, including this one.
Reading Your Loan Estimate: Which Line Is This?
Your Loan Estimate and Closing Disclosure group government charges under “Taxes and Other Government Fees.” Whether a local recordation tax sits on the recording-fees line or the transfer-taxes line is a disclosure call for your title company and lender, so confirm with them rather than assuming either.
It matters because of tolerance limits. The CFPB says transfer taxes cannot rise from the Loan Estimate to closing unless there is a change in circumstances. Recording fees can rise up to 10% in total, together with other items in that group. Which bucket the county tax falls into depends on how it is classified.
The practical move is simple. When your Loan Estimate arrives, ask the loan officer or title agent to name the line holding the recordation tax. Then ask whether the figure came from the county computation.
Who Pays, and What It Does to Your Cash
The tax is one-time and paid at closing. It comes out of your closing costs. If you roll costs into the loan, it gets financed, which raises the loan and the next taxable slice. That is a loop worth knowing about before you choose how much cash to take.
For a cash-out, the tax comes out of your pocket one way or another. Either it reduces the cash in hand, or it is financed and adds to the balance. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Here is the part that surprises people. Government taxes are the same whichever lender you pick. Recordation tax will not differ between two lenders. Compare lenders on what they control: their loan terms, their fees as shown on the Loan Estimate, and how their program fits your equity.
Where the General Rule Breaks
A few edge cases change the answer.
- Purchase breaks do not carry over. The Council packet footnote says the $100,000 exemption on a principal residence does not apply to refinancing, second-home or commercial transactions. A purchase-money mortgage is separately exempt under the statute, but that is a purchase, not a cash-out. If you bought recently and expect the same break, you will not get it.
- Who counts as the original mortgagor. The statute defines this to include certain assuming owners and certain living-trust trustees. A secondary source says a spouse added to the new loan does not defeat the exemption. The Maryland State Bar Association guide also notes the exemption does not require tax to have been paid on the original mortgage. Use that qualitatively and check the version.
- Occupancy. After a 2013 change, the exemption covers non-principal-residence property too. Occupancy still matters to the loan. Primary home, second home and investment property each carry their own leverage limits in the jumbo lanes. Published sources treat the new-money slice the same way across occupancy types.
- Assignments. An assignment of a mortgage is not taxable. A paid-off loan re-papered through assignment is not the same as a true refinance. Ask the title company instead of assuming.
- Other places. The District of Columbia has a similar new-money rule with different figures. Other states and counties vary widely.
How This Lands on the Loan Itself
The tax does not change your appraisal or your home’s value. It does not change your loan-limit status either. The jumbo-versus-conforming line is drawn by the FHFA limit alone.
What it changes is your cash. Across the wholesale programs Lendmire places files with, jumbo cash-out is limited by leverage and by structure. The headline lane starts at a 660 decision score and reaches up to 90% leverage on purchase. Cash-out sits at lower leverage than purchase, and the largest lanes add a cash cap. Several lanes reach 89.99% combined loan-to-value, and the rest stop at 80%. Loans run to $5,000,000 on the largest lanes. The fixed lanes allow a 50% debt-to-income ceiling, with 45% on the adjustable lanes and 43% on the interest-only lanes. Reserves and appraisals scale with the amount, and two appraisals apply above a lane’s threshold. Every figure here is subject to lender guidelines and full file review.
Combined loan-to-value (CLTV) is the total of all loans on the home divided by its value. It is the number that decides how much cash-out the program leaves you.
Take that into the tax math. If the program’s cap trims your cash-out, your taxable slice shrinks with it. If you were planning to roll closing costs in, those costs push you toward the cap and toward a larger slice. Run both versions before you pick an amount.
Lendmire arranges these loans through wholesale lenders and does not lend directly. The jumbo cash-out refinance program page lays out the structures in more detail.
A Decision Checklist for Your Cash-Out
Use these questions in order. They mirror how the tax actually works.
1. What is my exact payoff? Get the figure from your servicer for the closing date.
2. How much new money do I need? Choose the smallest amount that does the job.
3. Am I rolling in costs? Each dollar financed increases the taxable slice.
4. Does the county’s computation match the table above? Ask the title company to show the arithmetic.
5. Is the affidavit right? The payoff and your status as original mortgagor must be correct.
6. Does a smaller cash-out change my product? A cash-out that moves the loan across the county’s conforming limit changes the product and pricing.
If the break-even looks thin, a smaller cash-out or a different structure may serve you better than the maximum the program allows.
Key Terms Defined
Recordation tax: a one-time government tax paid to record a new mortgage on the public land record.
New money: the part of a refinance loan that exceeds the unpaid principal on the old loan. It is the taxable slice.
Marginal bracket: a tax range where the stated figure applies only to the slice of value inside that range, not to the whole amount.
Original mortgagor: the borrower on the existing mortgage, a term the statute stretches to cover certain assuming owners and trustees.
Payoff: the unpaid principal balance of your current mortgage on the day it is repaid.
Combined loan-to-value (CLTV): all loans against the home divided by its value, shown as a percentage.
Frequently Asked Questions
Is the tax charged on my whole new jumbo loan?
No. A refinance is exempt up to the unpaid principal on the loan being replaced. Only the amount above that payoff is taxed, per the Maryland statute and the county’s own Council packet. The exemption uses your current balance, not your original loan amount.
Does a bigger cash-out mean a higher tax per dollar?
Usually, yes. The tax steps up at $500,000, $600,000, $750,000 and $1,000,000, so more new money reaches the steeper brackets. How the slice is slotted into those steps is something to confirm with the county computation.
Can I use my purchase credit on a refinance?
No. The county’s $100,000 principal-residence exemption does not apply to refinancing. Do not count on a break you used when you bought the home.
Will a different lender cut this tax?
No. It is a government tax, the same whichever lender you choose, though the lender or title company collects and discloses it. Compare lenders on lender-controlled items and the full terms on the Loan Estimate.
Does a cash-out trigger transfer tax too?
Not on a standard refinance, since no deed transfers. The state-level rule excludes security instruments such as deeds of trust. The county’s own transfer tax may be treated differently, so ask your title agent to confirm.
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.
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. Montgomery County Council packet, Bill 17-23
2. Maryland General Assembly, Tax-Property §12-108
3. Nelson Mullins, Increased Recordation Tax Rates in Montgomery County
5. FHFA
6. CFPB, Can my final mortgage costs increase from what was on my Loan Estimate?
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: How Much a Jumbo Cash-Out Nets a W-2 Homeowner After Closing Costs · Jumbo Cash-Out Requirements for a Condo in Litigation · Can a Lock-in Homeowner Get a Jumbo Cash-Out on a Duplex?
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.