Maryland exempts a refinance from recordation tax up to the unpaid principal of the existing loan when the original mortgagor refinances, so only the new money is taxed, under Tax-Property 12-108(g).
On a cash-out DSCR refinance, recordation tax on the full loan can run to thousands of dollars. This guide covers how much is exempt, who qualifies and what an LLC borrower should confirm first. For the Maryland rules that apply statewide, see DSCR loans in Maryland.
How much of a Maryland refinance is exempt from recordation tax?
The new loan is exempt only up to the unpaid principal of the existing mortgage being refinanced, and new money above that payoff is taxed at the county rate.
| Cecil County example at $4.10 per $500 | Amount |
|---|---|
| Existing unpaid principal | $180,000 |
| New DSCR loan | $260,000 |
| Taxable new money | $80,000 |
| Recordation tax with the exemption | $656 |
| Recordation tax without it | $2,132 |
Exception: The statute measures the exemption by unpaid principal, so ask the title company how it will treat interest or costs rolled into the new loan.
According to Md. Code, Tax-Property 12-108, Maryland General Assembly, and the Cecil County Circuit Court clerk's recording fees page, as of October 2026.
Who counts as the original mortgagor?
The borrower who took out the existing loan, plus a buyer who assumed the debt and paid recordation tax on the purchase, a person who received the property under a deed exempt under subsection (p) or (y), and the trustee of an inter vivos trust when the trustee or settlor took on the debt; the exemption also covers the original mortgagor's spouse where applicable.
- Subsection (p) covers transfers between a parent entity and its wholly owned subsidiary, and between subsidiaries wholly owned by the same parent.
- Subsection (y) covers converting a partnership or sole proprietorship, including an individual who holds title in their own name, into an LLC.
Exception: A deed into an LLC under the real estate enterprise exemption in subsection (bb) is not on the (g)(1)(ii) list, so on the statute's face an LLC that took title that way does not inherit original mortgagor status.
According to Md. Code, Tax-Property 12-108(g), (p) and (y), Maryland General Assembly, as of October 2026.
Can an LLC claim the exemption on a rental?
The current text of 12-108(g) has no principal residence or owner-occupancy condition, but the 2004 version did, and at least one county clerk's page still describes it.
- The 2004 text of 12-108(g), as reprinted in SB 76, required the property to be used as a principal residence by the original mortgagor.
- The Cecil County clerk's page still lists a principal residence statement in the affidavit.
Exception: A clerk may still apply the older wording, so confirm with the title company that your county will accept the exemption for an LLC on a rental before closing.
According to Md. Code, Tax-Property 12-108(g), 2004 Senate Bill 76 and the Cecil County clerk's page, as of October 2026.
What paperwork claims the refinance exemption?
A statement in the recitals or acknowledgment of the new mortgage or deed of trust, or a sworn affidavit filed with it, stating that the signer is the original mortgagor or its agent and the unpaid principal being refinanced.
- Under 12-108(g)(4), an agent's statement must be based on a diligent inquiry into the facts it states.
Exception: Without the statement or affidavit, the exemption isn't available and the full loan amount is taxed.
According to Md. Code, Tax-Property 12-108(g)(3) and (4), Maryland General Assembly, as of October 2026.
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This page is general education about business-purpose real estate financing and state law as published by official sources on the date shown. It is not legal, tax or lending advice, not an offer to lend and not a rate quote. Laws and lender guidelines change; confirm current rules with the lender, the title company and your own attorney or tax adviser.