How Montgomery County Counts Recordation on a Bank Statement HELOC

The Quick Read: In Montgomery County, Maryland, recordation tax is figured on the principal amount of debt the recorded deed of trust secures, and on a credit line that can mean the stated maximum rather than the drawn balance. Bank statement income documentation has no effect on that count. The tax follows the recorded instrument.

• The tax base is the debt secured, taxed per $500 of debt or fraction of $500.
• A HELOC deed of trust can be taxed up front on its full limit, or as draws occur.
• Refinance relief covers only the unpaid balance of the existing debt, not a new junior line.
• The county’s $100,000 exemption applies to owner-occupied purchases, so it does not help a rental line.
• On this network, an investment-property equity line caps at 70% CLTV and $500,000, subject to lender guidelines.

Montgomery County, Maryland is the worked example here. The rule underneath it, that a recording tax can be measured on a line’s stated maximum, shows up in many states, so the logic carries over. The numbers do not. Always confirm the current schedule with the county or a real estate attorney before a closing.

What Does “Counting” Recordation Actually Mean?

Counting means deciding which dollar amount the tax is applied to. Maryland Tax-Property §12-103 applies the rates to each $500 or fraction of $500 of the consideration payable or the principal amount of the debt secured. For a mortgage or deed of trust, the base is the debt secured. It is not the property value.

Three charges get confused on these files:

The county also has its own transfer tax, which Montgomery County’s MC311 service page puts at 1% of the selling price. That is a deed charge. A credit line behind an existing mortgage involves no sale, so it does not come into play.

Where Do Bank Statements Come In?

They don’t. Bank statement documentation is a way of showing income. It qualifies a borrower on documented income under the applicable program, subject to lender guidelines. Recordation is set by what the recorded instrument says it secures. Two files with identical deeds of trust owe the same tax whether the income was shown by traditional personal-income documentation or twelve months of deposits.

One difference does matter in practice, and it is structural. An equity line on this network is reviewed mainly on the borrower’s credit and debt-to-income ratio (50% maximum, and 45% for scores from 600 to 679). A DSCR cash-out qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Those are different tests, and they produce different recorded instruments with different tax bases.

How Does the County Count a Credit Line?

The count depends on how the deed of trust is written and which election is made. The state rule works in three steps.

1. The base is principal secured. The tax attaches to the principal amount of the debt secured, per §12-103.

2. Debt not yet incurred is taxed later. Under §12-105(f), as reproduced in the legislative text of HB 409, if the full secured debt has not been incurred at recording, tax applies only to the debt incurred then. When more debt is incurred later, the debtor files a sworn statement and pays tax on the additional amount, with the exact filing timing depending on the statute’s current text.

3. The maximum-principal election. An archived version of §12-105 allows the tax to be computed on the maximum outstanding principal stated to be secured, regardless of what is advanced or readvanced. That is an older code page, and the current text sits on the General Assembly site. Confirm how Montgomery County handles the election today.

So a deed of trust recorded with a stated maximum can pay tax up front on the whole limit. The alternative is paying as draws happen, with the 7-day reporting duty attached. That duty is where files break. A borrower who elects draw-basis payment and then forgets the sworn statement on the first advance has created a compliance gap that someone has to clean up later.

If a new advance simply repays debt already incurred under the same instrument, no further tax applies, per the same §12-105(f).

What Are the Rates?

The county base is $2.08 per $500 of debt secured under Montgomery County Code Sec. 52-16B. A law-firm alert on the 2023 changes describes three parts: the $2.08 base, a $2.37 school increment, and a premium on value above $500,000. The premium tiers, per $500, run as follows.

Treat this as a reference sketch, not a closing figure. Older rate guides circulate with pre-2023 numbers, and some pages mix state and county components. Pull the current schedule from the county code or the Council’s Bill 17-23 packet before relying on any figure.

Rounding matters too. A partial $500 unit counts as a full unit, so the tax is applied to the line amount rounded up to the next $500.

On this network, an investment-property equity line tops out at $500,000 total. The premium tiers start above $500,000 of debt secured, so a line at that cap would sit at the edge of the premium bracket on its own. If a first mortgage is being refinanced into a larger new instrument, the secured amount is a different question and the premium bands can come into play.

Where Does the General Rule Break?

Several named edge cases change the count.

Refinance exemption. Under §12-108, a new deed of trust is exempt to the extent it refinances no more than the unpaid principal of the existing debt, and only for the original mortgagor. Ballard Spahr’s explainer walks through it. The part above the unpaid balance is taxed. Since 2013 the exemption reaches entities and any property type, so it matters to investors. A sworn affidavit stating the unpaid balance is required.

A junior line is not a refinance. A new line behind an existing first mortgage replaces nothing. The refinance exemption likely does not reach it. That is an inference, not a published rule, so a recording attorney or the county should confirm it for the specific file.

Purchase-money exemption. A purchase-money mortgage is exempt under §12-108. A line taken later is not purchase money. Assignments of a mortgage are not taxed either.

The $100,000 county exemption. It applies to owner-occupied purchases, per the Council packet. It does not apply to refinancing, second homes, or commercial transactions, so it does nothing for a rental-property line.

Indemnity deeds of trust. These were historically used to defer recordation tax. Semmes notes that debt secured by one is now deemed incurred when the borrower incurs it. Do not assume a deferral structure still works.

Moderately priced dwelling units. Properties in the county’s MPDU program carry extra lender requirements on a line or refinance, including sending the recorded deed of trust to the county office, per the county housing department. The deadline for that submission varies, so confirm it with the county and the lender. Check for an MPDU covenant before the file goes in.

What Network Parameters Apply to an Investor Line?

The recordation count only matters if the line fits the program. Across the select wholesale partners Lendmire works with, the equity line is a standalone line in first or second lien position, and the investment-property version has tight edges, subject to lender guidelines and full file review.

• Ceiling: 70% CLTV on an investment property, with a 700 minimum credit score and a $500,000 maximum line.
• Structure: a 5-year interest-only draw followed by a 25-year fully amortizing repayment. At least 75% of the line is drawn at closing.
• Valuation: lines at or below $500,000 ordinarily run automated valuation, though a higher CLTV may call for a secondary valuation, and a borrower may ask for a full appraisal.
• Vesting: title must sit with the individual borrower or an inter vivos revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on these lines.
• Property: manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not offered.
• Availability: the equity line is offered only in Lendmire’s 16 full-service states, which is narrower than the DSCR loan footprint of 41 markets, including Washington, D.C.

The vesting rule is the sharp one for investors. A Maryland rental already deeded to an LLC needs a vesting change before a line can go on it, and a deed change can trigger its own recordation and transfer charges. In that case a DSCR cash-out refinance, which can be held in an entity subject to lender program eligibility, is the cleaner comparison. Lendmire’s complete DSCR loans guide lays out that side.

Is 70% CLTV enough room? On a rental with a large first mortgage, often not. Stack the existing first lien and the new line together and the combined figure has to stay under the ceiling. That is the point where many investors find a cash-out refinance fits better, and the recordation tax on the two routes can differ a lot. A cash-out refinance taxes only the amount above the unpaid balance, while a junior line may be taxed on its full stated limit.

Does a Big Unused Limit Cost Money?

It can. Say you hold a rental with a modest first mortgage and want a line mainly as a backstop. If the deed of trust states a maximum and tax is paid on that maximum, the unused portion still carries tax. Choosing draw-basis payment may defer it but adds the 7-day sworn-statement duty on every advance. The tradeoff is cost against paperwork.

This is the decision the files turn on. A smaller limit lowers the up-front tax. A larger limit buys flexibility. Because the network requires at least 75% of the line drawn at closing, a big line is not a stand-by line anyway. Most of it is advanced on day one, so the maximum and the drawn balance end up close together. That narrows the gap between the two tax bases on this program, though it does not erase it.

A rough sizing habit helps. Ask the county or recording counsel which basis applies, price the tax at that basis, and compare it with the same equity pulled through a cash-out refinance. Keep recordation in the comparison next to the qualifying method, since a HELOC is recorded as a second mortgage and the tax can attach to the line’s stated maximum or to the drawn balance.

Key Terms Defined

Recordation tax: the tax charged when a deed of trust or mortgage is recorded in the land records.

Debt secured: the principal amount the recorded instrument says the lien stands behind.

Maximum-principal election: a choice to pay tax on the stated limit of a credit line instead of on each draw.

CLTV: combined loan-to-value, which adds the first lien and the new line together against the property value.

Unpaid principal: the balance still owed on the existing loan, which sets the size of the refinance exemption.

Reconciling the Number

Settlement reconciliation on these files is a matching exercise. Check four things against the recorded deed of trust and the settlement statement: the stated secured amount, the basis elected (maximum or draw), whether any exemption was claimed with the affidavit, and the rate tier the amount falls in. If any of the four is unclear, the tax line will not tie out.

Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Quote requests start at the Lendmire quote page or by phone at 828-256-2183.

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Maryland Tax-Property §12-103

2. Montgomery County MC311

3. Justia, §12-105 (archived)

4. Nelson Mullins alert on rate changes

5. Ballard Spahr on transfer and recordation tax

6. Justia, §12-108

7. Semmes on indemnity deeds of trust