The Quick Read: The county’s recordation tax on a refinance generally falls on the new money you borrow, not on the whole loan. That means the size of your cash-out drives the bill. VA lets the veteran pay this tax and the recording fees, and on a cash-out you can often finance them, within the value limit. Every dollar you finance comes out of the cash you walk away with.
Key Takeaways
- The tax is based on debt secured by your new deed of trust. On a refinance, the taxable slice is the new money above the payoff of the old loan.
- VA allows the borrower to pay recording fees and recording taxes. It bars lender overhead fees and attorney’s fees.
- A VA cash-out can reach 100% of the appraised value, funding fee included. Costs you finance eat into that ceiling and into your net cash.
- Larger cash-outs can push the taxable slice into a higher county tier.
- Your title company’s draft numbers are more reliable than any rule of thumb, so ask for them early.
Which Montgomery County Are We Talking About?
This article covers a Montgomery County property in Maryland, and the recordation tax math below follows that county’s rules. In the title, “VA” means the VA loan program, not the state of Virginia. Several states have a Montgomery County, and the tax rules differ in each. A county of that name in Virginia or Pennsylvania has its own recording costs and its own way of treating a refinance.
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: 7.18% as of November 5, 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.
If your home sits somewhere else, the VA side of this article still applies. The local tax math does not. Ask your title company which county code governs your deed.
What Is a VA Cash-Out Refinance, in Plain Terms?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan that is larger than what you owe. You keep the difference as cash. The old loan can be any type: conventional, FHA, or VA.
Across the wholesale programs we place VA files with, the cash-out reaches up to 100% of the appraised value. That ceiling includes the financed funding fee. There is no mortgage insurance. The funding fee for a cash-out is 2.15% for first use and 3.3% for subsequent use. It is waived for veterans receiving compensation for a service-connected disability and for the other exempt groups. You can finance the fee, which raises the loan balance.
Lendmire’s VA cash-out refinance program page covers the full program. The short version of the rest:
- The wholesale programs we use start at a 580 decision score. VA itself sets no minimum score.
- Residual income is the controlling test. That is the money left each month after your major obligations and living costs. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table.
- The new loan needs a net tangible benefit. That means VA’s rules require the refinance to help you in a measurable way, and VA lists eight benefits to choose from.
- Seasoning applies. That is a waiting period: the later of 210 days from your first payment and your sixth payment.
- The half-percent rate-reduction test and the fee-recoupment test belong to the IRRRL (VA’s streamlined refinance). They do not apply to a cash-out.
Every figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Key Terms Defined
Recordation tax: A county charge for putting a loan’s security document on the public record. In Montgomery County, Maryland, it is based on the amount of debt the document secures.
Recording fee: A flat government charge to record and index your documents. It does not depend on loan size.
Deed of trust: The Maryland security instrument that ties the loan to the property. This is the document that gets recorded and taxed.
Type I cash-out: A VA refinance where the new loan, funding fee included, does not exceed the payoff of the old loan. It puts no cash in your hand.
Type II cash-out: A VA refinance where the new loan is larger than the payoff. Only this type produces cash to you.
Reasonable value: The value VA’s appraisal sets for the home. The maximum loan is measured against it.
Net proceeds: The cash you actually receive after payoff, taxes, fees, and financed costs.
Why Does a Refinance Trigger a Recordation Tax at All?
A refinance creates a new deed of trust. The old one is released and the new one goes on record. The county taxes the recording of that new security instrument, which is why a loan with no new cash can still show a line item.
The county code sets the tax per $500, or fraction of $500, of the principal amount of debt secured. Montgomery County’s Finance Department publishes the current tier table. The rate per $500 steps up once the taxable amount passes $500,000, and it steps again at several higher levels. Counties set their own rates, so a neighboring county’s number tells you little.
Maryland also has a statutory exemption for refinances, and your title company confirms its details. In general terms, the tax applies to the amount above the unpaid principal of the loan being replaced. A pure replacement loan gets relief on the old balance. New money does not.
How the Tax Gets Calculated on a Cash-Out
Think of it as a four-step sequence.
1. Start with the new loan amount. For a VA cash-out, that includes any financed funding fee and any other costs you roll in.
2. Subtract the payoff of the old loan. Use the unpaid principal balance, not the original loan amount. Ask your title company which payoff figure it uses.
3. The remainder is the taxable slice. This is the new money, plus anything financed on top of the payoff.
4. Apply the county tiers. The tax follows the rates the county sets per $500 of debt. The tier that matters is the one the taxable slice reaches.
The steps are simple, but the planning problem is the circle inside them. If you finance your costs, the loan gets bigger. A bigger loan means a bigger taxable slice. A bigger slice means more tax, which you may also finance.
How the tiers apply to a slice that crosses a band is something only your title company can confirm. A made-up dollar example would mislead you, so none appears here. Your title company’s draft will show the real calculation.
Here is where tier jumps matter. A cash-out that keeps the taxable slice modest stays in the lower bands. A large cash-out on a high-value home can cross into a higher band. That is a planning point for jumbo-sized VA loans, which the wholesale programs we use serve up to $4,000,000 with full entitlement. Even a small increase in cash-out can change the bracket.
Type I vs. Type II: The Split That Changes Your Bill
The loan type decides whether there is new money to tax. VA Circular 26-19-05 defines both.
| Factor | Type I | Type II |
|---|---|---|
| New loan vs. payoff | At or below payoff | Above payoff |
| Cash to you | None | Yes |
| New money to tax | Little or none | The excess |
| Costs financed in | Can count as new debt | Count as new debt |
A Type I may owe little or no tax on the principal portion. Fees financed into the loan can still count as new debt, though. Ask the title company to run the numbers on your exact structure instead of assuming zero.
What Does VA Let You Pay?
VA lets the veteran pay recording fees, recording taxes, and other charges incident to recordation. Chapter 8 of the VA Lenders Handbook lists these as itemized charges. They sit outside the lender’s capped flat charge.
That flat charge covers lender overhead that is not reimbursable as an itemized fee. Settlement, document preparation, notary, trustee, and escrow fees fall under it. The same chapter bars attorney’s fees from being charged to the borrower. Fees that come from local variances can be charged only if VA specifically authorizes them.
So the common claim that VA bans these charges is wrong. VA allows the tax and the recording fees. It bars the overhead and the attorney’s fees.
One more practical point. Government recording costs do not change from lender to lender. The flat charge and any lender overlays do. When you compare offers, compare those, not the tax.
Where the Cost Shows Up on Your Paperwork
Your Loan Estimate shows these costs as estimates, and your Closing Disclosure shows the final amounts. Under the CFPB’s Regulation Z disclosure rule, recording fees are government charges to record and index the loan and title documents. Transfer taxes are state and local charges based on the loan amount or price. The label used under local law does not decide where an item is disclosed.
In practice, a county tax based on loan amount may land on the “Transfer Taxes” line, not the “Recording Fees” line, even though the county calls it a recordation tax. Check the actual disclosure instead of assuming. A large number on one line and a small one on the other can look like an error, so ask your title company to walk you through both.
Montgomery County processes documents through an electronic recording system called Simplifile. Your title company handles the submission. You do not file anything yourself.
Where the General Rule Breaks
A few edge cases trip up borrowers who read only the headline rules.
Purchase breaks do not carry over. A principal-residence exemption exists for buyers. The county’s own Council packet on the 2023 recordation changes says it does not apply to refinancing, second home, or commercial transactions. First-time buyer breaks work the same way: they are for purchases, not for an existing owner refinancing.
A cash-out is not a rate-and-term refinance. The VA ceiling on a Type II cash-out is 100% of reasonable value, funding fee included. Some lenders set a lower cap as their own policy, and that is not a VA rule. Do not assume the program number is the same at every lender.
Occupancy matters. VA cash-out is for a home you occupy as your primary residence. If your Montgomery County property is a rental, the leverage and the program change.
Tier jumps. A cash-out that sits just under a band can cross it once you add the financed funding fee and costs. Run the structure both ways.
A funding fee exemption changes the base. If you are exempt, there is no funding fee to finance, so the financed amount starts from a different base. Whether that matters for the recordation slice depends on how your lender and title company treat the loan amount, so confirm it against your own closing figures.
Other counties. Maryland rates differ county by county. A friend’s closing in a neighboring county tells you nothing about yours.
Your Cash-in-Hand Worksheet
Build this line by line before you commit. Dollar amounts are left out on purpose. Fill them in from your title company’s draft.
1. Appraised value, which is VA’s reasonable value. 2. Maximum loan: up to 100% of that value, funding fee included. 3. Minus: payoff of the old loan. 4. Minus: funding fee, if you are not exempt and you finance it. 5. Minus: recordation tax on the taxable slice. 6. Minus: recording fees. 7. Minus: appraisal, title, and credit report charges. 8. Minus: the lender’s flat charge. 9. Equals: your net proceeds.
Two things to notice. First, every financed line reduces line 9 dollar for dollar. Second, if your loan is already near the 100% ceiling, there is no room to finance these costs. You may have to pay some in cash.
Questions to Put to Your Title Company
- What payoff figure are you using for the old loan?
- What is the taxable amount, and which county tier does it reach?
- Does the refinance exemption apply here, and does it need an affidavit or specific wording?
- How are the recordation tax and the clerk’s recording fees split on the Loan Estimate?
- What happens to the tax if I roll all costs into the loan versus paying some at the table?
- Can you send a draft with the tax and the fees itemized?
Ask for that draft before you finalize the loan amount. A cash-out sized to a round number can land in a worse tier than one sized to what you need.
Common Budgeting Mistakes
- Applying Virginia or Pennsylvania rules to a Maryland property. Rules are local.
- Taxing the whole loan in your head. The refinance exemption changes the base.
- Forgetting clerk fees. They are separate from the tax.
- Counting on purchase-time exemptions. They do not follow you into a refinance.
- Ignoring the circle. Financed costs grow the loan, and a bigger loan grows the tax.
- Treating the 100% ceiling as free room. Costs financed inside it shrink your cash.
- Shopping on the tax. Rates differ by county, but within your county the tax does not change with the lender. Compare the lender’s charges and overlays.
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
Does a VA cash-out refinance owe recordation tax on the whole new loan?
Generally no. As it is commonly understood in Maryland, the tax applies to the new money above the unpaid principal of the loan being replaced. Your title company confirms the exact base, because the statute’s details matter. Financed fees can add to the taxable slice.
Can I roll the recordation tax into a VA cash-out?
Often yes on a Type II, as long as the total stays within the 100% value limit, funding fee included. Each financed dollar raises the balance and cuts your net cash. If you are close to the ceiling, you may need to bring cash for some costs.
Is a recording fee the same as a recording tax?
No. A recording fee is a flat government charge to record and index your documents. A recordation tax is based on the amount of debt the document secures. They can appear on different lines of your disclosures, and your title company can show you each one.
Does the principal-residence exemption help me on a refinance?
No. The county’s Council packet says that exemption does not apply to refinancing. It is a purchase benefit tied to the buyer of a conveyed property.
Does the VA funding fee change my recordation bill?
Indirectly, yes. If you finance the fee, the loan gets larger, so the taxable slice can grow. For a cash-out the fee is 2.15% for first use and 3.3% for subsequent use. Veterans receiving compensation for a service-connected disability, and the other exempt groups, pay none.
Your Next Step
Run the worksheet with your title company’s itemized draft before you pick a cash-out amount. 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. Lendmire arranges consumer loans in 16 states, so confirm that your property’s state is one of them. Program figures are subject to lender guidelines and full file review.
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.
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References
1. Montgomery County Department of Finance: Recordation Tax Changes
3. VA Lenders Handbook, Chapter 8: Borrower Fees and Charges and the VA Funding Fee
4. CFPB Regulation Z, Section 1026.37
5. Montgomery County Council packet on recordation tax changes
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: Rolling Closing Costs Into a VA Cash-Out vs Paying Them Upfront · VA Cash-Out vs Conventional Cash-Out on a Premarital Home · How to Get the Most Cash From a VA Cash-Out After Payoff and Costs
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.