Why is the field labeled “Existing Secured Principal Debt To Be Paid Off With This Transaction” in Maryland?
Maryland’s recordation/transfer tax rules treat refinances differently from purchases. For qualifying MD refinances, tax is calculated only on the amount exceeding the unpaid principal on the debt being refinanced—not the borrower’s total payoff. Additionally, we sometimes see people include courtesy payoffs within this amount, which is not correct, and so to make that clear to users and reduce cure risk, LodeStar’s refinance input in Maryland is labeled “Existing Secured Principal Debt…” rather than a more generic “Existing Debt.”
What the law says (plain-English)
- Statute: Maryland Tax–Property § 12-108(g)(2) states that a refinance deed of trust “is not subject to recordation tax to the extent that it secures the refinancing of an amount not greater than the unpaid principal amount secured by an existing mortgage … at the time of refinancing,” when other conditions are met. (Maryland General Assembly)
- County guidance/examples: Multiple county finance/clerks’ resources and forms implement this as “unpaid principal balance,” explicitly excluding interest/fees and showing calculations based on principal for refinances. (Howard County)
Bottom line: Using principal (not total payoff) aligns the quote with the MD refinance exemption calculation and helps prevent cures.
How LodeStar handles the input
- Labeling (Maryland only): The refinance field is labeled “Existing Secured Principal Debt To Be Paid Off With This Transaction.” This change was implemented across MD to reflect statutory language and reduce confusion seen in audits/cures.
- What value to enter: Enter the unpaid principal balance of the secured debt(s) being refinanced as of closing, excluding interest, late charges, escrow shortages, per-diem, or other payoff add-ons. (That’s what Maryland counties ask you to swear to on refinance affidavits.) (Howard County)
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LOS mapping: We map to your LOS’s field that represents the existing debt on the secured debt (not the full payoff). If your environment uses a custom field or a different LOS, please reach out to support@lssoftwaresolutions.com so we can confirm the correct mapping.
- For Encompass, we will automatically pull the amount from field 26 into LodeStar's calculator.
Example (why “principal” matters)
A borrower’s payoff letter shows $255,000 total due, which includes $250,000 principal + $5,000 interest/fees.
For MD refinance tax purposes, the eligible exemption/measurement uses $250,000 (principal) – not $255,000. Labeling the field “Principal” helps ensure the right number flows into the tax calculation.
Sources
- Maryland Code (official site): Tax–Property § 12-108(g)(2) (refinance–unpaid principal). (Maryland General Assembly)
- Annotated/secondary references: Summaries of § 12-108(g)(2) (unpaid principal for refi). (Justia Law)
- County forms/guidance: Refinance affidavits and examples reinforcing unpaid principal (excludes interest/fees). (Howard County)
If you use a custom “principal unpaid debt” field or a non-Encompass LOS, contact support and we’ll align your mapping so Maryland refinance taxes calculate correctly.