Recordation taxes are incurred in recording mortgages and deeds of trust in Maryland, which can be as high as 1.3% of the loan amount . Certain techniques have arisen in order to avoid or minimize these taxes. These generally involve the purchase of existing loan documents or use of guaranties.
1
Determine whether the existing financing can be purchased.
In some cases, the lender being refinanced will have no interest in anything other than being paid off, or will be unwilling to provide requisite representations and warranties.
2
If not, consider use of a guaranty.
The Guaranty can be secured by an indemnity deed of trust which, under an attorney general opinion, is not subject to the recordation tax.
3
If using a guaranty, make sure the title coverage for the lender will not be affected.
Because of possible crediors' rights issues, title insurance must be checked to ensure that no exceptions are taken that would impair the title insurance coverage.
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