The Quick Read: On a DSCR cash-out refinance of a Maryland rental, recordation tax generally applies only to the new money above the old unpaid principal, because a refinance exemption covers the existing balance when the same party that took the original loan is refinancing, and living in another state does not change the tax base.
- The tax attaches to the new deed of trust, not to a transfer of the deed, so the state’s flat transfer tax does not apply to the loan.
- Rates are set by county and by city, so two identical loans can net very different cash.
- The exemption follows the “original mortgagor,” so moving title into a new LLC right before the refinance can put the full new loan at risk of tax.
- Out-of-state status mostly changes logistics (signing, notarizing, delivering originals), plus Maryland registration if an out-of-state LLC holds the property.
- Cash-out on an investment property tops out around 75% LTV on most programs we place, so tax and costs come out of proceeds that are already capped.
What Gets Taxed on a Cash-Out Refinance?
The new deed of trust gets taxed, and the deed does not move. Recordation tax applies to any instrument of writing recorded in the land records, including mortgages and deeds of trust. Transfer tax is a separate flat 0.5% charge that applies to deeds and does not apply to a mortgage or deed of trust, per LegalClarity’s Maryland recordation guide.
DSCR Cash-Out Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 8, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
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As of Oct 8, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
| Instrument | Recordation tax? | State transfer tax? |
|---|---|---|
| Deed | Yes | Yes |
| Deed of trust (new loan) | Yes, unless exempt | No |
| Payoff of old loan | Not a new instrument | No |
“There is no transfer tax on a refinance, so there is no tax” is a misreading. The loan itself is the taxable document. The next section shows how much of it escapes.
How Does the Refinance Exemption Work?
The exemption shields the old balance and leaves the new money taxable. Under Maryland’s Tax-Property Article, a deed of trust is not taxed to the extent it secures a refinancing no greater than the unpaid principal of the existing mortgage. The refinancing must be done by the original mortgagor, as the statute text at FindLaw shows.
Investors often assume this is an owner-occupant benefit. It is not. A 2013 change extended it from principal residences to any person, which can include an entity, and to any property type, according to Gordon Feinblatt.
The calculation runs in four steps:
1. Read the unpaid principal balance from the payoff letter. This balance excludes interest and fees, so accrued interest and prepayment charges on the payoff are not exempt amounts. 2. Subtract that balance from the new loan amount. The remainder is the taxable new money. 3. Divide the new money into $500 increments. Any fraction of an increment counts as a full one. 4. Multiply by the county rate.
Here is the worked example from Cecil County’s clerk guidance. Those figures describe a county tax calculation, not a loan quote.
- New loan: $200,000.
- Prior unpaid balance: $135,865.
- New money: $64,135, which is 129 increments.
- County rate: 4.1 per $500, so the tax is $528.90.
A common mistake is to apply the tax to the whole $200,000. The exemption cuts the taxed amount by roughly two-thirds in this case.
Which County Rate Applies?
The county where the property sits sets the rate, and Maryland has no single statewide mortgage recordation rate. A Maryland law firm’s survey at Starfield & Smith shows how far the numbers spread.
| Jurisdiction | Rate in the survey |
|---|---|
| Baltimore and Howard Counties | $2.50 per $500 |
| Baltimore City, Calvert, Caroline, Harford, Wicomico | $5.00 per $500 |
| Charles and Frederick | $7.00 per $500 |
| Anne Arundel | $7.00 per $1,000, rounded up to $500 |
| Montgomery | Tiered, $4.45 per $500 up to $500,000, rising to $11.35 per $500 above $1,000,000 |
City Finance’s recordation FAQ confirms Baltimore City’s own rate of $5.00 per $500, or fraction thereof, of the principal amount of the debt secured. Rates change, so confirm the current number with the clerk or settlement agent before you estimate proceeds.
Montgomery’s tiers matter for larger loans. The portion of new money above $500,000 is taxed at a steeper rate, so the cost grows faster than the loan does.
When the Exemption May Not Apply
The exemption can fail when the borrower on the new loan is not the original mortgagor on the old one. The statute treats several parties as original mortgagors:
- A person who assumed a debt on property they bought and paid recordation tax on.
- A person who received the property from the original mortgagor under certain exempt deeds.
- The trustee of an inter vivos trust, if the trustee or settlor incurred the debt.
Personal name to a new LLC. Many investors want a DSCR loan in an LLC even though the old loan sits in their own name. The statute’s list does not mention a deed into an LLC. The cautious reading is that an LLC taking title right at the refinance may not count as the original mortgagor, which could expose the full new loan to tax. That is our reading of the statute text, not a court holding, so ask the settlement agent to confirm in writing before the loan is structured. Whether an entity borrower is accepted is subject to lender program eligibility.
LLC to the same LLC. This is the cleanest case. The same party refinances, and the exemption covers the old balance.
Bought and assumed a prior loan. Original-mortgagor status holds only if recordation tax was paid on the purchase.
Principal reduction. If the new loan is no greater than the current principal balance, no recordation tax is charged.
County add-ons. Some counties, Prince George’s among them, charge their own transfer taxes, and the refinance exemption is not mirrored there. Ask the clerk about county-level charges.
Purchase-money contrast. A purchase-money deed of trust can be exempt when it is recorded in connection with the taxable deed, subject to the applicable recording requirements. That relief does not extend to cash-out proceeds.
Ownership reshuffles. Moving membership interests is a separate trigger. Maryland’s controlling-interest transfer tax generally applies when more than 80% of a real property entity changes hands. Do not restructure the LLC at the same time as the refinance without asking first.
What Does Out-of-State Ownership Change?
Mostly logistics, and not the tax. Your address does not change the base, the exemption, or the county rate.
| Area | Does it change? |
|---|---|
| Tax base and rate | No, set by the property’s county |
| Exemption rules | No, follow original-mortgagor status |
| Signing and notarizing | Yes, usually remote or by mail |
| Who delivers originals | Yes, the title agent or an attorney |
| Entity registration | Yes, if an out-of-state LLC holds title |
Ask the settlement agent early about notary options and whether a power of attorney is acceptable to the lender. A power of attorney is a lender and title decision, so do not assume it.
Sales have nonresident withholding rules for sellers. Those are sale rules, and they generally are not part of a refinance. Confirm that with your closing agent.
Does an Out-of-State LLC Need to Register in Maryland?
Usually yes. Nolo explains that a foreign LLC owning income-producing real property in Maryland is considered to be doing business there. Registration runs through the state’s SDAT. It requires a certificate of good standing from the home state issued within the last 60 days, and Nolo lists a $100 filing fee for LLCs.
Lenders and title companies commonly ask for the SDAT certificate of status at closing. An unregistered foreign LLC doing business in Maryland also cannot file suit in Maryland courts as a plaintiff, which matters the day a tenant stops paying. Register before you apply, not during the file.
Key Terms Defined
Recordation tax: a tax on documents recorded in the land records, including a deed of trust.
Transfer tax: a separate tax on deeds. The state’s flat rate does not apply to a mortgage.
Original mortgagor: the party that took out the existing loan, or one the statute treats as standing in that party’s place.
Unpaid principal balance (UPB): the remaining principal on the old loan, excluding interest and fees.
New money: the part of the new loan above the old UPB, which is the part that is taxed.
DSCR: the ratio of a rental’s income to its full monthly payment of principal, interest, taxes, insurance and any HOA dues, known as PITIA.
How Does the Tax Fit Into a DSCR Cash-Out?
The tax comes out of proceeds the loan has already capped. Across the wholesale network we place files through, most programs top out around 75% LTV on a cash-out refinance of a standard investment property. They also commonly expect about 6 months of ownership, measured from title recording.
Coverage matters too. A 1.00 ratio is where select programs start, and stronger ratios tend to open better pricing and leverage. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Standard programs go up to $3,000,000. All of this is subject to lender guidelines, and each file is underwritten individually.
Clearing 1.00 does not mean the property produces positive cash flow. DSCR compares rent to PITIA only, so repairs, vacancy, management and capex sit outside it.
A cash-out never guarantees cash. Proceeds equal the new loan, minus the payoff, minus recordation tax, title fees, recording fees and closing costs. In a high-rate county on a larger loan, the tax line can be meaningful. For the same reason, one county’s math says little about another’s.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
What Order Should You Do Things In?
Settle title before you apply. The order that works well is:
1. Decide how the property will be vested, personal name or LLC, and which state’s LLC.
2. Register an out-of-state LLC with SDAT if it will hold title.
3. Order the payoff letter and read the unpaid principal balance from it.
4. Ask the settlement agent which county forms apply, and whether the exemption can be claimed given who the borrower is.
5. Prepare the deed of trust with the sworn original-mortgagor statement, either in the recitals or as a separate affidavit that states the unpaid principal being refinanced.
6. Send the package to the clerk, keeping in mind that even an exempt document may still have to go to the recordation tax unit for review.
The affidavit is where files get rejected. Prince George’s, for example, has its own refinance affidavit, so a generic form can fail there. Clerks also look at whether the instrument states the existing balance correctly.
Our practical view across files is that the vesting decision causes more recordation surprises than the county rate does. Investors price the rate and forget to check who the original mortgagor is.
Questions to Ask Your Settlement Agent
- Is the borrower on the new loan the original mortgagor on the old one?
- Can you confirm in writing that the exemption applies, and for what amount?
- What is the county’s current rate for this loan size?
- Does the county charge any transfer tax or add-on that the refinance exemption does not cover?
- Does the lender need the SDAT certificate of status, and is the LLC already registered?
- Is any additional tax triggered by a change in the ownership structure?
Tax treatment can depend on how the funds are used and how the property is held, so keep clear records and speak with a qualified tax professional before relying on any deduction.
If your Maryland rental sits near the District or Virginia, Lendmire’s piece DSCR Cash-Out Recordation Rules for Maryland, D.C. and Virginia compares the neighboring jurisdictions. For the basics of how these loans work, see the complete DSCR loans guide.
Frequently Asked Questions
Is recordation tax charged on the whole cash-out loan?
Usually not. When the exemption applies, only the amount above the old unpaid principal is taxed. Interest and fees on the payoff letter do not count toward the exempt amount. If the borrower is not the original mortgagor, the full new loan may be taxed.
Does moving the property into an LLC before the refinance change the tax?
Yes, it can. The exemption protects the original mortgagor, and a new LLC is not clearly on the statute’s list. Ask the settlement agent to confirm in writing before the loan is structured. Whether an LLC borrower is accepted is also subject to program terms.
Do I owe Maryland’s transfer tax on a refinance?
No. The flat state transfer tax applies to deeds and does not apply to a mortgage or deed of trust. Recordation tax applies to the new deed of trust instead, and some counties add their own charges.
Does living out of state raise the recordation tax?
No. The tax follows the property’s county and the loan amount, not your address. Out-of-state status affects signing logistics and, for an out-of-state LLC, Maryland registration.
Can I take cash out of a rental I just bought?
Most programs we place files with expect about 6 months of ownership, measured from title recording. The cash-out ceiling is about 75% LTV on an investment property, and lender guidelines vary.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a mortgage broker arranging financing through select lenders in its wholesale network, with DSCR programs across 41 markets, including Washington, D.C. This article is informational and not a commitment to lend.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
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References
1. LegalClarity’s Maryland recordation guide
2. FindLaw, Md. Code Tax-Property § 12-108
4. Cecil County recordation guidance
5. Starfield & Smith, Maryland recording taxes
6. Nolo, foreign business in Maryland
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: DSCR Cash-Out Documentation When a Lease Expires During Refinance · How to Clear a Solar Lien on Your First Rental Before a DSCR Cash-Out · How to Keep a Standing HELOC on a Rental to Fund the Next Deal
Guides: Investment Property Cash-Out Refinance in Maryland
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.