A security interest instrument
A deed of trust. The statute names the instrument, not the transaction — so first or second lien, purchase money or refinance, the same rule applies.
DC Recordation Tax
DC charges nothing to refinance.
Not the new money. Not the cash-out. Nothing — on residential property of five units or fewer, with one notarized affidavit at recording.
Most homeowners assume a DC refinance is taxed the way a purchase is, or the way Maryland taxes one — on the money you did not owe before. It is a reasonable assumption and it is wrong.
D.C. Code § 42-1102(21) exempts a security interest instrument in Class 1A or 1B Property … that contains no more than 5 dwelling units. The exemption attaches to the instrument, not to a portion of the proceeds — so a cash-out refinance is covered in full, and so is a second deed of trust. The Office of Tax and Revenue says so in its own words: in Tax Notice 2023-04 it states that a security interest instrument concerning such property is fully exempt.
The test
Three conditions, and that is the whole rule.
Class 1A or 1B property
Residential, as classified under § 47-813. Owner-occupancy is not required; a residential rental qualifies on the same terms.
No more than five dwelling units
The unit count is the test. Essentially every rowhouse, condo and small multi-unit in DC sits inside it.
The one thing that has to happen
ROD Form 21, at recording.
The exemption is not automatic. It is claimed with a one-page notarized form — the Security Affidavit for Class 1 property, ROD Form 21 — affixed to the deed of trust when it is recorded. On it the owner certifies that the property is Class 1 residential with five or fewer dwelling units.
Your settlement agent prepares and files it. If it is omitted, the recording falls onto the general rule at § 42-1103(a)(3)(A), which taxes the new money — and on a substantial cash-out that is a four-figure difference for a missing page. It is a fair thing to ask your title company to confirm is in the package.
Recordation tax is charged by DC at recording. It is not a lender fee and not part of our pricing.
Across the borders
Why DC is the outlier.
The same refinance is treated three different ways in three adjacent jurisdictions.
Washington, DC
Fully exempt under § 42-1102(21) with the ROD Form 21 affidavit affixed at recording. The cash-out portion is covered, because the exemption reaches the whole instrument.
Maryland
Exempt only up to the unpaid principal balance — the new money is taxed. In Montgomery County the brackets are positioned by the full new loan amount, not by the new money, which makes the bill larger than the obvious calculation suggests.
Virginia
No exemption. A refinance is re-taxed on the entire obligation at a reduced rate, plus the local share, rather than being exempted.
District Mortgage is licensed in the District of Columbia only. The comparison above is context for a DC homeowner, not an offer to lend elsewhere.
You asked
Does this apply to me?
Does refinancing trigger recordation tax in DC?
No. D.C. Code § 42-1102(21) fully exempts a security interest instrument on Class 1A or 1B property containing no more than five dwelling units. A residential refinance recorded with the required affidavit owes nothing — and that includes the cash-out portion, because the exemption covers the whole instrument rather than a slice of it.
What is the ROD Form 21 affidavit?
ROD Form 21, the Security Affidavit for Class 1 property, is the one-page notarized form affixed to the deed of trust at recording. On it the owner certifies, under penalty, that the property is Class 1 residential with five or fewer dwelling units. It is the only condition attached to the exemption. Your settlement agent prepares and files it; the form still says "Class 1" while the statute reads "Class 1A or 1B", which the Recorder of Deeds accepts.
Do I have to live in the property to qualify?
No. Owner-occupancy is not a condition. Class 1A and 1B under § 47-813 turn on residential use and unit count, so a residential rental of five units or fewer qualifies on the same terms as a home you live in.
Does the exemption cover a home equity loan or a second deed of trust?
Yes. The statute exempts a security interest instrument and draws no distinction by lien position or transaction type — nothing in the text limits it to first liens, purchase money, or rate-and-term refinances. A second deed of trust on qualifying residential property is covered like any other.
What happens if the affidavit is not filed?
The instrument falls out of the exemption and onto the general rule at § 42-1103(a)(3)(A), which taxes the new money — the amount by which the new principal exceeds what was already secured. That is the fallback, not the norm, and on a large cash-out the difference between the two outcomes runs to thousands of dollars. It is worth confirming with your settlement agent that the affidavit is in the package.
Is DC transfer tax owed on a refinance?
No. Transfer tax attaches to a conveyance, and a refinance transfers nothing — you already own the property. Only recordation tax is ever in question on a refinance, and for qualifying residential property the answer to that is the exemption above.
How does DC compare to Maryland and Virginia?
DC is the outlier, in the homeowner's favor. Maryland exempts only up to the unpaid principal balance and taxes the new money, and in Montgomery County the tax brackets are positioned by the full new loan amount rather than by the new money alone — which makes the bill larger than most people compute. Virginia re-taxes the entire refinanced obligation at a reduced rate rather than exempting it. District Mortgage is licensed in the District of Columbia only; the comparison is offered as context, not as an offer to lend in those states.
Does refinancing affect my homestead deduction or assessment?
No. Refinancing is not a sale and triggers no reassessment, so the homestead deduction, any senior benefit, and your assessment cap carry on undisturbed.
Is District Mortgage a bank or a mortgage broker?
District Mortgage is a licensed mortgage broker, not a bank or direct lender. We do not fund loans with our own money. We take your application and shop it across our wholesale lender network, so the lenders compete for your loan and you take the winning offer. NMLS #2819502 — verify us at nmlsconsumeraccess.org.
Can District Mortgage do a loan on a property outside Washington, DC?
No. We are licensed in the District of Columbia only, so the property has to be in DC. We cannot accept an application or a pre-qualification request for a property in Maryland, Virginia, or any other state. If your property is elsewhere, nmlsconsumeraccess.org will show you licensed originators in that state.
Where do the rates on this site come from?
Our rates page is the canonical source for our pricing and carries an effective date, the APR alongside every rate, and the borrower assumptions each example is priced on. Rates shown anywhere on this site are current rate examples priced for the borrower assumptions published alongside them, not offers of credit or commitments to lend, and pricing moves daily. Anyone quoting a rate from us should cite the effective date it was published with.
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Put it to work
Sources: D.C. Code § 42-1102(21) and § 42-1103(a)(3)(A); D.C. Code § 47-813; OTR Tax Notice 2023-04; Recorder of Deeds Form ROD 21. General information, not tax or legal advice — confirm your own recording with your settlement agent.
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