The Quick Read: Yes. A VA cash-out refinance can pay recording fees and recording taxes, either out of your loan proceeds or by being added to the new loan balance. The total must stay within VA’s limit of 100% of the appraised value, including the financed funding fee. The amount of the tax comes from local law, not from VA, and a refinance exemption may shrink the taxable amount.
A quick scope note first. “Recordation tax” is a Maryland term, and this article is about Montgomery County, Maryland. Other states have a Montgomery County, and their recording charges work differently. Do not carry Maryland’s numbers over to them. The principle travels, though: VA allows recording charges, and local rules set the amount.
VA cash-out estimate
Seeded with an example value, a typical balance, and a round cash request at the first-use fee; change any field.
Editable benchmark: 7.24% as of October 29, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the full-value VA cap with the first-use funding fee financed, a thirty-year term at the current Freddie Mac 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 conventional benchmark, a market reference and not a VA cash-out refinance quote; a VA loan is priced by the lender at lock. The total loan, funding fee included, is capped at the program leverage on the reasonable value; the fee follows the tier chosen. The cash available is what the cap allows less the balances paid off and the fee, before closing costs, which are not included. 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. The debt-to-income figure is a guideline; residual income decides a VA file. Licensed in sixteen states for consumer mortgages.
What Is Recordation Tax, and How Is It Different From a Recording Fee?
Recordation tax is a charge Maryland and the county place on the new debt when your loan paperwork is entered into the land records. A recording fee is a small clerk’s service charge for filing the document. The two are separate line items on your closing paperwork, and people mix them up constantly.
Here is how the three charges that confuse borrowers compare:
| Charge | What it is | Does it hit a refinance? |
|---|---|---|
| Recording fee | Clerk’s filing charge | Yes |
| Recordation tax | State and county tax on the debt | Yes, on taxable debt |
| Transfer tax | Tax on a deed changing hands | Generally no |
Transfer tax belongs to sales. In a refinance, you already own the home and no deed changes hands, so transfer tax generally does not apply. Recordation tax does apply, because a new deed of trust (the document that secures your loan against the home) gets recorded.
On your Loan Estimate and Closing Disclosure, these show up in the section for taxes and other government fees. You can see them before you sign.
Does VA Let You Pay Recordation Costs With a Cash-Out Loan?
Yes. VA’s rules let a veteran pay reasonable recording fees and recording taxes, and a cash-out refinance can fund them. VA permits only certain charges to the borrower, and recording is on the list. A lender can’t charge you more than the actual amount, and it should be able to back the charge with a document.
The rule itself sits in VA’s loan charge regulation. It names “recording fees and recording taxes or other charges incident to recordation” as charges the veteran may pay. Nothing in VA’s program waives them.
That surprises people. A common myth says VA loans are exempt from state and local recording taxes. They are not. VA benefits do not erase a county’s tax.
The same regulation sets the funding fee. It is the one-time VA fee that most veterans pay and that exempt groups do not. On a cash-out refinance, the funding fee is 2.15% for first use and 3.3% for subsequent use. Veterans receiving compensation for a service-connected disability are exempt, along with a few other groups.
A different myth says the lender’s flat origination charge covers government charges. It does not. That flat charge is in place of the lender’s own origination costs. Recording charges are itemized separately.
Lendmire’s VA cash-out refinance program page lays out how the program works from the borrower’s side. The short version: it refinances any loan type into a VA loan and reaches up to 100% of the appraised value, with the financed funding fee counted inside that figure. All of it is subject to lender guidelines and a full file review.
How Does a Cash-Out Pay for Closing Costs?
A cash-out loan is bigger than the loan you are paying off. The extra pays your closing costs and, if anything is left, goes to you. Think of it as three buckets filling from one pile: the payoff, the costs, and your net cash.
VA’s Lenders Handbook says allowable fees and charges can be paid from loan proceeds on a cash-out. It also sets the ceiling: 100% of the reasonable value on the VA appraisal (called the Notice of Value, or NOV), plus the funding fee and any energy-efficiency improvements.
So the order of operations runs like this:
1. A VA appraisal sets the reasonable value.
2. The lender builds the new loan: payoff, allowable costs, funding fee, and any cash to you.
3. The total must fit under the ceiling.
4. What is left after payoff and costs is your net cash.
If the costs go up, the net cash goes down. Dollar for dollar. No magic involved.
Across the wholesale programs Lendmire places VA loans with, the decision score starts at 580, and amounts reach $4,000,000 with full entitlement. Those are program minimums and maximums, not promises. Residual income, meaning what you have left each month after major obligations, is the controlling test for the file. A 41% debt-to-income figure is a guideline, not a cap.
Some lenders stop short of VA’s 100% and cap cash-out lower. That is a lender choice, not a VA rule. It matters when you compare offers, because a lower cap leaves less room for costs and cash.
Pay in Cash, Take From Proceeds, or Finance It?
You have three ways to handle recordation costs on a VA cash-out. Each changes your closing cash, your loan balance, and your net proceeds differently. None of them is wrong. They are tradeoffs, and the right one depends on how much room you have under the value ceiling and how you want your money arranged.
| Approach | Cash at closing | Loan balance | Net cash to you |
|---|---|---|---|
| Pay out of pocket | You bring cash | Unchanged | Unchanged |
| Deduct from proceeds | None needed | Unchanged | Lower |
| Add to the loan | None needed | Higher | Unchanged by this cost |
The second and third rows overlap in practice. On a cash-out, the lender usually builds all costs into the new loan, and what is left over reaches you as cash. Whether you describe that as “from proceeds” or “financed” is often a matter of how the closing paperwork presents it. What counts is the final loan total and the ceiling.
A financed cost isn’t free. It is a one-time charge that you then pay interest on for the life of the loan. A larger balance means a larger payment, so the tradeoff is more money in hand today against a bigger loan.
Picture a veteran whose home appraises well above the payoff. There is plenty of room under the ceiling, so building the tax into the loan is simple. Now picture a veteran who is already near 100% of value. There is little room, so the costs might have to come out of pocket or the cash-out shrinks. Same loan, different arithmetic.
Why Do Some Lenders Say You Can Only Finance the Funding Fee?
That rule is real, but it belongs to purchases. VA’s closing cost guidance says that on a purchase, only the funding fee can be rolled into the loan amount. Closing costs on a purchase are paid in cash or covered by the seller.
A refinance is different. Here the new loan replaces an old one, and the limit is a share of the home’s value instead of the purchase price. That is why a cash-out can absorb allowable costs and a purchase cannot.
So when you read two lender pages that seem to contradict each other, check which loan type each one discusses. Both can be right. One may be talking about buying a home and the other about refinancing it.
One more distinction. Some refinance rules belong only to the interest rate reduction refinance loan, known as the IRRRL, which refinances an existing VA loan with no VA appraisal. The tests that apply to it, such as the rate-reduction and fee-recoupment tests, do not apply to a VA cash-out. A cash-out does carry its own conditions, including seasoning (the later of 210 days from your first payment and your sixth payment on the existing loan) and a net tangible benefit, meaning the refinance must actually help you in one of VA’s listed ways.
How Montgomery County’s Tax Works on New Debt
Maryland’s recordation tax is calculated on the debt your deed of trust secures, and the county sets its own rates. Montgomery County’s Department of Finance publishes the schedule. It is tiered, with a base rate of $2.08 per $500 of debt and a school increment of $2.37 per $500. A premium rate applies to the portion of debt above $500,000, in steps that rise with the amount.
Two points keep the math from surprising you:
- Rates are per $500 of debt. The result is rounded up to the next $500.
- Tiers stack. Higher amounts land in higher brackets, so the county page is the one to check for your total.
Rates change when the county changes them. Read the current schedule on the county’s page rather than trusting any article’s snapshot, including this one. Lenders and title companies also confirm the exact figure at closing.
Here is a worked example in plain terms, with no dollars. Say your existing loan has a certain unpaid balance. You refinance into a loan that is a set percentage of the home’s value, and that percentage includes your payoff, costs, the funding fee, and cash to you. The tax question is how much of that new loan is “new money” above the old balance. That slice is what the exemption rules may leave exposed.
The Refinance Exemption: What It Covers and Who Qualifies
Maryland exempts the part of a refinance that only replaces your old debt. The state statute, Md. Tax-Property §12-108, says a mortgage is not taxed to the extent it refinances an amount no greater than the unpaid principal of the existing mortgage. The property must be refinanced by the original mortgagor, or the original mortgagor and spouse.
The exemption has a few conditions worth knowing:
- It covers principal only. “Unpaid principal balance” does not include accrued interest or fees.
- It needs paperwork. The original mortgagor or an agent states the exemption in the recitals or acknowledgment of the deed of trust, or files a sworn affidavit. The statement must say the person is the original mortgagor and give the unpaid principal being refinanced.
- It is aimed at principal residences. A VA loan is for your primary home, so the occupancy lines up.
Now apply that to a cash-out. The old balance is exempt. The new money is not. That new money includes the cash you take out and any costs or fees that get financed into the loan. On a cash-out, you pay recordation tax on that difference.
So the real answer to “how much tax will I owe?” is: it depends on how much new money your loan creates. A small cash-out on a large old balance has a small taxable slice. A large cash-out has a large one.
Lendmire’s team sees this question most often from borrowers who expect “refinance” to mean “no tax.” It means “less tax,” and the paperwork has to be right for even that. Ask your title company early.
Special Cases That Change the Answer
A few situations can change the tax. Raise them with your title company before you commit to a number.
You are not the original mortgagor. Suppose you bought the home with an existing mortgage in place. The exemption may not apply the way you expect. Maryland’s statute defines the term to include some assumptions and certain trustees, so the details matter. Do not assume you qualify. Confirm it.
A supplemental instrument is involved. A supplemental instrument is taxed to the extent new money is payable or the principal debt rises.
You are comparing a purchase-side break. Montgomery County offers owner-occupant relief on certain home purchases. That is a purchase benefit. Don’t count it as a refinance benefit, and don’t assume an amount.
You are exempt from the funding fee. Disabled veterans receiving compensation skip the funding fee. They still owe recordation tax. Fee exemption and tax exemption are two separate things.
The home is not your primary residence. VA loans are for the home you live in, and Maryland’s refinance exemption also depends on principal-residence use. If the title raises a second home or a rental, occupancy decides the leverage and the loan program, and VA’s primary-residence rule is the starting point.
Key Terms Defined
Recordation tax: A state and county tax charged on the debt secured by a recorded deed of trust.
Deed of trust: The document that secures your loan against the home and gets recorded in the land records.
Notice of Value (NOV): VA’s appraisal result, which sets the reasonable value and the ceiling for your loan.
Funding fee: A one-time VA fee, financeable into the loan and waived for exempt veterans.
Original mortgagor: The borrower on the mortgage being refinanced, whose status can unlock the Maryland refinance exemption.
Unpaid principal balance: What you still owe on the old loan, not counting interest or fees.
Closing-Day Checklist and Questions for Your Title Company
Before closing, run through these. Short list, real value.
1. Ask whether you qualify as an original mortgagor, and who files the affidavit or recital. 2. Ask for the taxable amount of the new loan, in words and in the county’s per-$500 terms. 3. Compare the recording lines on the Loan Estimate with the Closing Disclosure. 4. Check that the new loan total, including the financed funding fee, fits under the value ceiling. 5. Ask how much net cash you will receive after payoff, costs, and the fee. 6. Confirm whether the county schedule has changed since your estimate.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Can recordation tax be rolled into a VA cash-out loan?
Yes, within VA’s limits. On a refinance, allowable charges can be paid from proceeds or built into the new loan, as long as the total stays at or under 100% of the appraised value, including the financed funding fee. On a purchase, only the funding fee can be financed, so the answer there is no.
Does a refinance mean I owe no recordation tax in Montgomery County, Maryland?
No. A refinance by the original mortgagor is exempt only up to the unpaid principal of the old loan, and paperwork is required. New money, such as cash out and financed costs, is taxed. Your title company confirms the exact taxable amount.
Do disabled veterans skip recordation tax along with the funding fee?
No. Veterans receiving compensation for a service-connected disability are exempt from the funding fee. Recordation tax is set by Maryland and the county, so the exemption does not carry over.
Is recordation tax the same as transfer tax?
No. Recordation tax is charged on recording the loan’s deed of trust. Transfer tax applies when a deed changes hands in a sale. A refinance generally has no transfer tax, but it can have recordation tax.
Does this apply to other Montgomery Counties?
No. Pennsylvania, Texas, Ohio, and other states have a Montgomery County, and their recording charges work differently. VA’s rule that you may pay reasonable recording charges is national. The amounts are local.
Weighing a Cash-Out Against Keeping Your Loan
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. Bring your payoff, your goals for the cash, and your questions about the recording line, and the team will walk through the options. Program figures are subject to lender guidelines and a full file review, and nothing here is a commitment to lend.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. eCFR, 38 CFR 36.4313: Charges and fees
2. VA Lenders Handbook, Chapter 6
3. VA: Funding fee and closing costs
4. Montgomery County Department of Finance: recordation tax changes
5. Maryland Tax-Property Article §12-108
This article is part of Lendmire’s VA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: VA Cash-Out Refinance Requirements With the Closing Costs Rolled Into the Loan · Can You Get Approved for a VA Cash-Out Refinance as a Veteran? · Can You Do a VA Cash-Out Right After a Purchase or IRRRL?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.