How the District of Columbia Sizes Recordation Charges on an FHA Cash-Out

The Quick Read: D.C. looks at three things: whether your home is qualifying Class 1 residential property, how much new debt exceeds your old balance, and which documents back up the claim. FHA rules decide how big your loan can be. D.C. rules decide what the government charges to record it. For many qualifying homes, the charge may be mostly a flat recording fee, subject to lender guidelines and full file review.

What Are You Actually Being Charged?

A recordation charge is what the District collects to put your new deed of trust on the public record. A deed of trust is the document that pledges your home as security for the loan. For a Washington DC home, the charge comes in two pieces: a flat recording fee and a percentage-based recordation tax.

The flat fee is a set amount per document. The Recorder of Deeds FAQ says it charges a flat fee for recording any deed of trust, mortgage or modification. Title companies may quote a slightly different figure once surcharges are added, so check your own estimate.

The tax is the part that scales. Under D.C. Code § 42-1103, a security instrument is taxed on the debt it secures. The statute text states a rate of 1.1%. An older tax notice from the Office of Tax and Revenue words the rate differently, with a higher figure for some property. Because the sources differ, confirm the rate that applies to your property with the Recorder of Deeds, which makes the final call.

One common mix-up: the transfer tax does not apply to your refinance. Mortgages and deeds of trust bear only the recordation tax.

How Does FHA Size the Loan First?

Everything starts with the loan amount, because the tax follows it. An FHA cash-out refinance replaces your current mortgage with a bigger one and hands you the difference. Across the wholesale programs Lendmire places FHA files with, the cash-out reaches 80% loan-to-value (LTV) on a home you have owned and occupied for 12 months before the case number. LTV is the loan balance divided by the appraised value. The FHA cash-out refinance program page lays out how that fits your equity.

That 80% cap counts every lien that stays on the home. HUD’s Handbook 4000.1 update records that the cash-out cap was lowered to 80%, consistent with Mortgagee Letter 2019-11. The older 85% cap is history.

Two points trip people up here:

• The cap is on total debt against value, not on the cash you can take. Eighty percent LTV does not mean 80% of your home’s value in your pocket.
• The cap is not a promise. Credit, income, payment history and occupancy still decide the file, subject to lender guidelines.

Costs financed into the loan eat into that same room under the cap. Your lender decides which costs can be financed, and county loan limits apply on top of everything.

Step by Step: How the Charge Gets Sized

Here is the sequence a title agent works through. It is a walkthrough, not a quote.

Step 1: Classify the property. Is it Class 1 residential property with no more than five dwelling units? The Council’s current code preview words this as “Class 1A or 1B Property”. In plain terms, think qualifying residential property of up to five units. A typical house, condo or small multi-unit home usually fits that picture, though the Recorder decides. The test turns on property class and unit count, not on who lives there.

Step 2: Check for the exemption. If the property qualifies, the owner signs an affidavit attached to the deed of trust. In it, the owner certifies under penalty of false-statement law that the property is Class 1 with five or fewer units. Title company materials describe a Class 1 refinance with the affidavit as owing mainly the clerk’s recording fee. Treat that as practitioner experience, not a guarantee.

Step 3: If no exemption applies, find the taxable base. The refinance rule in § 42-1103 taxes only new debt above the existing principal balance. This holds when the old debt was a purchase-money mortgage or was itself taxed. The math is plain:

• Take the new loan’s face amount.
• Subtract the principal balance of the old debt.
• The difference is the starting point for the tax.

Step 4: Add up what moved the balance. On a cash-out, that difference includes the cash to you. It also includes any financed costs that raised the balance.

Step 5: File the paperwork. A separate Form FP-7/C is filed for each deed of trust not recorded with a deed. The preparer lists the total amount, then the exempt and taxable parts, per the form instructions.

Key Terms Defined

Recordation tax: The percentage-based charge D.C. places on recording a deed of trust or mortgage.

Deed of trust: The security document that pledges your home for the loan; D.C. uses it in place of a traditional mortgage document.

Class 1 property: The D.C. tax classification for qualifying residential property, which matters for the exemption.

Affidavit: A signed statement, made under penalty of law, that the property meets the Class 1 test.

CLTV: Combined loan-to-value, which adds every lien on the home and divides by appraised value.

Cash-out refinance: A new loan that pays off the old one and puts the extra equity in your hands.

Where Does an FHA Cash-Out Fit Against Other Refinances?

The type of refinance changes the taxable increment. This is where a cash-out stands apart from other FHA options.

The Streamline refinances an existing FHA loan with no appraisal and a net tangible benefit. A rate-and-term refinance with an appraisal reaches 97.75% LTV on a principal residence you have occupied for the previous twelve months. Neither adds cash. A cash-out does, and that cash is the piece the tax formula is built to catch. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

For a qualifying Class 1 home with the affidavit in place, the exemption may soften the difference. For anything else, the cash you take out scales your charge.

Where the General Rule Breaks

The clean story above has exceptions. These are the ones that change the answer.

Not Class 1. FHA finances one- to four-unit owner-occupied homes, so unit count alone rarely takes an FHA file out of the exemption. Property classification can. If D.C. does not treat the property as Class 1, the exemption is unavailable and the full tax math applies. A title company page puts the rate for non-Class 1 refinances at a figure above the statute’s base rate. That is a practitioner view, so confirm it with the Recorder.

Modifications. A modification, amendment or restatement can be treated as a refinance of the entire debt. Under OTR Tax Notice 2014-05, amounts paid to the borrower in the preceding 12 months can count in the modified debt. The notice is older and later notices cover refinances, so check the current version.

Co-ops. The code exempts security instruments of a cooperative housing association, under a separate paragraph of § 42-1102.

Construction-to-permanent loans. The permanent deed of trust is taxed only on the amount above the construction loan.

Purchase-money loans. A purchase-money deed of trust recorded with the deed can be exempt, but a cash-out years later does not get that treatment.

Missing paperwork. This is the costly one. Under OTR Tax Notice 2023-03, if a refinance claim is not properly substantiated, tax is imposed on the outstanding balance of the existing debt. The notice asks that the instrument say on its face that it is a refinance. It also asks for a reference to the prior instrument and the tax paid or exemption claimed. Those notices are keyed to the commercial refinance exemption. Whether a residential refinance needs the same package is a question for your title agent.

What a Practitioner Sees on These Files

Across FHA cash-out files, the surprise is rarely the FHA side. The loan size, the 80% cap and the occupancy history get sorted out early. The surprise comes later, when the closing estimate shows a government line that does not match what the borrower expected.

Two habits prevent most of it. Ask the title agent up front whether your property qualifies as Class 1 and whether the affidavit is part of your closing package. Then compare the government charges on your Loan Estimate with the final Closing Disclosure line by line. If a line moves, ask why before you sign.

What the Decision Looks Like in Practice

Picture a homeowner with a qualifying one-unit home. The plan is a cash-out to pay off a smaller existing loan and fund repairs. The loan lands at no more than 80% of appraised value, counting any lien that stays. If the Class 1 affidavit is signed and attached, the government charge may be mostly the flat recording fee.

Now change one fact. Say the title agent finds the property does not meet the Class 1 test. The exemption does not apply. The tax is aimed at the new loan’s face amount minus the old principal balance. Every extra bit of cash you take, and every cost you finance, pushes that difference up.

That is the real decision. Taking more cash raises the loan, and where no exemption applies it raises the recording tax too. Financed costs use up room under the 80% cap. A larger loan also means a larger payment, so review that with your lender before you commit.

FHA adds its own costs. There is an upfront mortgage insurance premium of 1.75% of the base loan, which is financed, and an annual premium that depends on term, amount and LTV. Those are separate from D.C.’s charges, but they stack in the same closing picture.

If your file has a co-borrower, note this: income from a non-occupant co-borrower cannot be used to qualify for a cash-out refinance, per HUD’s handbook. That differs from the purchase program, so raise it early.

Weighing the same question across the border? Lendmire’s piece How Maryland Counties Size Recordation Charges on an FHA Cash-Out shows how the answer changes by jurisdiction.

Common Mistakes and Red Flags

• Assuming the tax hits the whole new loan. For a qualifying refinance, the statute taxes only new debt above the old balance.
• Assuming every D.C. home is treated alike. Class 1 status and the affidavit change the answer.
• Quoting an old rate. D.C. rate wording and code text have shifted over time. Check the current official source.
• Forgetting that financed costs count. They raise the balance and use cap room.
• Skipping the documents. An unsubstantiated claim can mean tax on the full existing balance.

Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

Next Step

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. A short conversation about your occupancy history, your lien picture and your property type will show which D.C. charge applies to your file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Recorder of Deeds FAQ

2. D.C. Code § 42-1103

3. HUD Handbook 4000.1 update transmittal

4. D.C. Code § 42-1102 (Council preview)

5. OTR Form FP-7/C instructions (hosted copy)

6. OTR Tax Notice 2014-05

7. OTR Tax Notice 2023-03