The Quick Read: Maryland’s recordation-tax exemption on a refinance covers only the amount you are paying off. Any cash you pull out above the old loan’s unpaid principal is treated as new debt and taxed. The exemption also depends on who you are: it is built for the original borrower, and the paperwork has to be worded correctly. The rules described here are Maryland’s. Other states set their own rules for taxing mortgage recording, so an owner elsewhere should check local law.
Key Takeaways
- A jumbo cash-out refinance is a new loan above the county’s conforming limit that pays off your old loan and hands you the extra equity.
- Maryland exempts the payoff portion from recordation tax. The cash-out portion is taxed.
- The exemption turns on being the “original mortgagor,” plus a correct affidavit or recital.
- Whether the loan is jumbo, how much cash you can take, and what tax you owe are three separate questions with three separate answers.
- Titles, trusts, inherited homes and assumed loans are where the exemption most often breaks.
What a Jumbo Cash-Out Refinance Actually Is
A jumbo loan starts one dollar above the conforming limit for your property’s county. A cash-out refinance replaces your current mortgage with a larger one and pays you the difference. Put together, it is a big new loan that retires the old one and converts some home equity into cash.
The conforming limit attaches to the property and its county, not to your income or credit. The Federal Housing Finance Agency sets a baseline for most of the country and a higher ceiling for expensive counties. Look up your county rather than guessing. Maryland counties do not all sit at the same limit.
Across the wholesale programs Lendmire places files with, jumbo cash-out loans share a recognizable shape. The headline lane uses a 660 decision score. Leverage reaches as high as 90% on purchases, but cash-out sits at lower leverage than a purchase. Loan amounts run to $5,000,000 on the largest lanes, and the largest lanes also put a cap on how much cash you can take. The debt-to-income ceiling is 50% on the fixed-rate lanes, 45% on the adjustable lane and 43% on the interest-only lanes. Reserves are counted in months of your full payment and rise with the loan amount. Everything here is subject to lender guidelines and a full file review, and none of it is a commitment to lend.
Lendmire’s jumbo cash-out refinance program gives the full picture of how those lanes work.
Two Taxes, Two Rule Sets
Maryland has a recordation tax and a transfer tax, and the two are easy to confuse. Recordation tax applies when a mortgage or deed of trust is recorded in the land records. Transfer tax applies when ownership changes hands. A refinance changes the debt, not the owner.
| Feature | Recordation tax | Transfer tax |
|---|---|---|
| What triggers it | Recording a mortgage or deed of trust | Change of ownership |
| Hits a refinance? | Yes, unless exempt | Generally not on a refinance |
| Has its own exemption? | Yes, for refinances | Separate rules |
| Who sets the rate | State law plus county | State and some counties |
One caution on the last two rows: the rules for recordation tax and transfer tax are separate, and some counties, Prince George’s among them, apply their own local rules. An exemption from one tax is no promise of relief from the other. Ask your title company how your county handles a refinance.
How the Maryland Refinance Exemption Works
The exemption lives in Maryland’s Tax-Property Article, section 12-108. In plain words, a mortgage is not subject to recordation tax to the extent it secures a refinance of an amount no greater than the unpaid principal on the existing loan.
Three phrases carry the weight.
“To the extent.” The exemption is partial. It protects the payoff amount and nothing above it.
“Unpaid principal.” This is the loan balance only. Baltimore City’s recordation guidance notes that it does not include interest, late charges or other costs and fees. Your payoff letter may be larger than your unpaid principal, and the difference does not count toward the exemption.
“Original mortgagor.” The property must be refinanced by the original borrower, or by that borrower and a spouse. The statute also reaches a trust settlor whose trustee does the refinance.
A plain no-cash-out refinance can be fully exempt when the paperwork is right. A cash-out refinance is exempt only on the part that replaces the old balance.
A Worked Example, in Percentages
Here is an illustration with made-up proportions, not a quote or a forecast. Say your current unpaid principal is 100 units. You refinance into a loan of 125 units.
- The first 100 units replace the old debt. They fall under the exemption, assuming you qualify and the paperwork is correct.
- The extra 25 units are new money. They are taxed at the standard recordation rate for your county.
Now stretch it to jumbo scale. A larger cash-out means more taxable new debt, and the tax bill grows with the size of the draw. Two borrowers with the same home and the same old loan can face very different recording bills, simply because one took a bigger cash draw.
That gives you a practical lever. If a portion of the cash would sit idle, trimming the draw trims the taxable amount too. It is one of several tradeoffs to weigh, and it rarely outweighs the reason you wanted the cash.
Step by Step: From Application to Funding
The underwriting follows a fixed sequence. Here is how a jumbo cash-out file moves, with the exemption pieces marked.
1. County check. The lender compares the new loan amount to the conforming limit for your property’s county. Above it, the loan is jumbo, and the investor’s own guidelines govern.
2. Application and verification. The lender documents your income or assets, your debts and your credit. Cash-out proceeds do not count as income. The new payment has to fit within the ratio ceilings above.
3. Appraisal. The appraised value sets your leverage. On a jumbo cash-out, the appraisal often decides how much cash is available. Above a lane’s threshold amount, the lane may call for two appraisals.
4. Reserves. The lender checks that you hold a set number of months of full payments in reserve after closing. The count rises with the loan amount.
5. Payoff figure. The title company pulls the existing loan’s unpaid principal. This is the number the Maryland exemption depends on.
6. Exemption paperwork. The original mortgagor, or an agent, adds a statement to the recitals or acknowledgment, or attaches a sworn affidavit. It says the signer is the original mortgagor and states the unpaid principal being refinanced. Some counties want their own form. Even an exempt document goes to the recordation unit for review.
7. Closing and signing. You receive a Loan Estimate early and a Closing Disclosure before signing. Compare the recording charges on the Closing Disclosure to what your title company told you to expect.
8. Cancellation window, then funding. On a refinance of your primary home, the cancellation window has to run before money is disbursed. More on that below.
One Loan, a Second Lien, or a New Lender
Jumbo owners often have more than one way to reach their equity. The structure changes the tax picture and the loan picture.
One new first loan. This is the standard cash-out. A single loan pays off the old one and delivers the cash. It is simple to document, and the recordation math is the payoff-versus-new-money split shown above.
Keeping the first loan and adding a second lien. You leave the existing loan alone and borrow against the equity separately. The tax treatment of that new lien is its own question to put to your title company. If a home equity line is already on the property, Lendmire’s piece on the requirements for an owner with a HELOC explains how that line has to be handled at closing.
A different lender. Your new lender can differ from your old one. The exemption does not care who holds the loan. It looks at who the borrower is and how the new principal compares to the old.
Repeat refinances. If you refinance a loan that itself came from a cash-out, the unpaid principal today is the benchmark. Ask your title company how the earlier tax was handled and what balance they will use.
Adding or releasing collateral. Changing what secures the loan can alter the exemption analysis. Raise it before you apply, not at the closing table.
Where the General Rule Breaks
The payoff-is-exempt rule works cleanly for a borrower who has held the same loan since the day they bought. It gets shaky in a handful of named situations.
| Situation | Exemption outlook | What to watch |
|---|---|---|
| Original borrower, same loan | Strong | Correct affidavit and balance |
| Borrower plus spouse | Strong | Both names consistent with the old loan |
| Living trust, settlor’s trustee refinances | Covered by statute | Trust documents ready |
| Heir or transferee new to the loan | Uncertain | May not count as original mortgagor |
| Assumed the loan and paid tax on the purchase | Can count as original | Confirm with title |
| Debtor substituted on the loan | Likely a new transaction | Bar-association guidance says exemption may not apply |
A few of these deserve more detail.
Not the original mortgagor. The statute stretches the term to include someone who assumed the debt and paid recordation tax on the purchase price. It does not clearly stretch to every new owner. Inherited homes, post-divorce title changes and re-titled property are the typical trouble spots. Settle them with your title company before you shop loans.
Occupancy. Older versions of the statute limited the exemption to a principal residence. Commentary says current law is broader and covers other property types and entities. Confirm how the current text applies to your property with your title company rather than assuming. On the lending side, occupancy is simple: primary, second-home and investment occupancy each carry their own leverage on the wholesale lanes.
County quirks. Counties can require their own affidavit forms. Rates differ from county to county. Check the form and the rate with your county or title company.
Paperwork errors. A misworded affidavit or a wrong principal balance can leave you paying tax you did not owe. Review the recording line on your Closing Disclosure against the exemption you expected.
The Protections That Still Apply on a Jumbo
Jumbo does not mean unregulated.
First, your lender must make a reasonable, good-faith decision, based on verified information, that you can repay. The Congressional Research Service overview of the ability-to-repay and qualified mortgage rules traces how those standards developed. Jumbo lenders can write loans that sit outside the qualified-mortgage safe harbor, which changes the legal protection but not the underwriting.
Second, on a refinance of your principal home you can cancel until midnight of the third business day after closing. The right of rescission does not apply to a home purchase. Business days count every day except Sundays and federal holidays, so it is not three calendar days.
Edge cases here too. The right does not cover every loan secured by a home. You can waive it only for a bona fide personal financial emergency, using a handwritten statement rather than a pre-printed form. Missing disclosures can extend the right for up to three years. The rule is currently in effect, though regulators have asked for public comment on how it interacts with other waiting periods. That is a question, not a change.
One more point of contrast. Agency guidelines separate “limited cash-out” from “cash-out” refinances. That distinction governs conforming loans. For a jumbo, treat it as a reference point, not a rule. Streamlined treatment for refinancing out of certain nonstandard loans also requires that the balance not increase, so a cash-out does not qualify for it.
What the Decision Looks Like in Practice
Think of four separate questions, answered in this order.
Is the loan jumbo? Compare the new loan amount to your county’s conforming limit.
How much cash can you reach? The appraisal and the lane’s cash-out leverage cap set the ceiling, and the largest lanes add a cash cap. Reserves and the 43% to 50% ratio ceilings may set it lower still.
What will recording cost? Estimate the payoff portion as exempt and the cash-out portion as taxed, then confirm with your title company.
Does the draw earn its cost? Take only what you will put to work.
Consider an owner who bought with a spouse years ago, has never assumed or transferred the loan, and wants to refinance into a single larger loan. That borrower is the textbook fit for the exemption. Now picture someone who inherited the house and wants to pull out cash. The loan side may work fine. The exemption side needs real homework first.
Tax treatment of any other kind can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Weighing Your 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. Lendmire is a mortgage broker licensed for consumer lending in 16 states and arranges these loans through wholesale lenders, so confirm your state is among them.
Before you sign anything in Maryland, ask your title company or county recordation office for the unpaid-principal figure, the county affidavit form and an estimate of the taxed portion.
Key Terms Defined
Recordation tax: A Maryland tax charged when a mortgage or deed of trust is recorded in the land records.
Original mortgagor: The borrower who took out the loan being refinanced, extended by the statute to certain spouses, trust settlors and borrowers who assumed the debt.
Unpaid principal: The loan balance still owed, not counting interest, late charges or fees.
A loan above the conforming limit is jumbo. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Cash-out refinance: A new, larger mortgage that pays off the old one and pays you the difference.
Right of rescission: Your right to cancel certain home-secured loans, including a primary-home refinance, during a short period after closing. The length of that period and how it affects the timing of funding vary by loan type, file, and lender.
Reserves: Money you hold after closing, counted as months of your full payment.
Frequently Asked Questions
Does a cash-out refinance qualify for the Maryland exemption at all?
Partly. The exemption covers the amount up to your existing unpaid principal, so the payoff portion can be exempt. The cash you take above it is new debt and is taxed at the standard rate. Confirm the split with your title company before closing.
Is transfer tax due on a refinance?
Usually not, because a refinance does not change ownership. County-level taxes are separate from the recordation exemption, though, and the exemption does not excuse them. Ask the title company what your county charges.
Can I use the exemption if my home is in a trust?
Often yes. The statute covers a trust settlor whose trustee refinances. Have the trust documents ready so the title company can word the affidavit correctly.
What if I inherited the home or took over the loan?
It depends on how you came to hold the loan. Someone who assumed the debt and paid recordation tax on the purchase can count as an original mortgagor, but a new party to the loan may not. Raise it with your title company before you apply.
Does a jumbo loan change my consumer protections?
No. The ability-to-repay standard and the three-business-day cancel right on a primary-home refinance apply to consumer mortgages of any size. What changes is the lender’s own guidelines, such as leverage, reserves and appraisals, all of which are subject to full file review.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. FHFA: Conforming Loan Limit Values announcement
2. Maryland General Assembly: Tax-Property § 12-108
3. Baltimore City Finance: Recordation Taxes
4. Congressional Research Service: The ATR/QM Rule
This article is part of Lendmire’s Jumbo Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Can a Business Owner Use a Jumbo Cash-Out for Working Capital? · Can a Jumbo Cash-Out Refinance Pay Off a Private Note? · D.c. Jumbo Cash-out Refinance
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.