Maryland - Recordation Tax on refinance

[Richard Distad]

Hi BP Members! First BP post! I have a question that pertains to the Maryland investors. I refinanced my first BRRRR property and at closing the person from the title company said that I was over paying on the recordation tax. Without much clarification she told me I was wasting my money bc I didn’t record the private lenders money (family member). Closing was not the best experience since I was trying to get clarification on my mistake but she was unable to fully explain it to me. A little background. I have a family member that loans me the money for the purchase of the property. I pay for the renovation of the property and I cash out to pay them off. I am looking to purchase another BRRRR rental soon and do not want to make the same mistake. How do I go about recording the private lender loan so I don’t pay recordation tax on the full amount when I refinance or is that unavoidable bc it’s a private loan. Thanks!

[Tom Gimer]

Family member’s purchase money mortgage would be exempt if recorded within 30 days of the deed. In other words, you would only pay the recording fee, not tax, on the DoT.

Then when you refi you would only be taxed on the difference between the principal balance of the mortgage you are paying off and the new loan amount. The refi exemption statute is Md Code Tax-Property 12-108.