A security interest instrument
A deed of trust. The statute names the instrument and does not limit the type of transaction, so the same rule applies to a first or second lien and to a purchase or refinance loan.
DC Recordation Tax
DC recordation tax exemption for residential refinances
DC charges no recordation tax on a refinance of residential property of five units or fewer, including the cash-out amount (D.C. Code § 42-1102(21)).
A DC refinance of a home with five or fewer units is fully exempt from recordation tax, including the new money on a cash-out refinance.
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 covers the whole instrument rather than a portion of the proceeds, so a cash-out refinance is covered in full, and so is a second deed of trust. In Tax Notice 2023-04, the Office of Tax and Revenue states that a security interest instrument concerning such property is fully exempt.
Who qualifies
The three conditions for the exemption
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 property must have five or fewer dwelling units. Rowhouses, condos, and small multi-unit buildings of up to five units qualify.
How to claim it
File ROD Form 21 at recording
The exemption is not automatic. The owner claims it with a one-page notarized form, the Security Affidavit for Class 1 property, ROD Form 21, attached to the deed of trust when it is recorded. On ROD Form 21 the owner certifies that the property is Class 1 residential with five or fewer dwelling units.
Your settlement agent prepares and files ROD Form 21. If the form is left out, the recording falls under the general rule at § 42-1103(a)(3)(A), which taxes the new money. On a large cash-out refinance that tax can run to four figures. Ask your title company to confirm the form is in the closing package.
DC charges recordation tax at recording. Recordation tax is not a lender fee and is not part of our pricing.
DC, Maryland, and Virginia
Refinance recordation tax in DC, Maryland, and Virginia
DC, Maryland, and Virginia each tax the same refinance differently.
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 tax brackets are set by the full new loan amount rather than by the new money, which makes the tax larger than a calculation on the new money alone.
Virginia
No exemption. A refinance is taxed on the entire loan amount at a reduced rate, plus the local share.
District Mortgage is licensed in the District of Columbia only. The comparison above is for DC homeowners and is not an offer to lend in Maryland or Virginia.
FAQ
DC recordation tax questions
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 no recordation tax, and that includes the cash-out portion, because the exemption covers the whole instrument.
What is the ROD Form 21 affidavit?
ROD Form 21, the Security Affidavit for Class 1 property, is the one-page notarized form attached 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. The affidavit 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", and the Recorder of Deeds accepts the form as written.
Do I have to live in the property to qualify?
No. Owner-occupancy is not a condition. Classes 1A and 1B under § 47-813 are defined by 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 makes no distinction by lien position or transaction type; nothing in the text limits it to first liens, purchase loans or rate-and-term refinances. A second deed of trust on qualifying residential property is covered the same way.
What happens if the affidavit is not filed?
Without the affidavit, the instrument falls outside the exemption and under the general rule at § 42-1103(a)(3)(A), which taxes the new money: the amount by which the new loan exceeds the balance already secured. On a large cash-out, that tax can reach thousands of dollars. Confirm with your settlement agent that the affidavit is in the recording package.
Is DC transfer tax owed on a refinance?
No. Transfer tax applies to a conveyance, and a refinance conveys nothing because you already own the property. On a refinance, only recordation tax is in question, and qualifying residential property is exempt from it under § 42-1102(21).
How does DC compare to Maryland and Virginia?
DC exempts the whole refinance loan; Maryland and Virginia do not. Maryland exempts only up to the unpaid principal balance and taxes the new money, and in Montgomery County the tax brackets are set by the full new loan amount rather than by the new money alone, which makes the bill larger. Virginia taxes the entire refinanced loan at a reduced rate. District Mortgage is licensed in DC only; the comparison is for context.
Does refinancing affect my homestead deduction or assessment?
No. A refinance is not a sale and does not trigger a reassessment, so your homestead deduction, any senior benefit, and your assessment cap stay in place.
What does District Mortgage do?
District Mortgage arranges home purchase, refinance, and cash-out loans on property in Washington, DC. One licensed loan officer handles your loan from application to closing, and our current rates are published on our rates page with the APR and effective date. 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.
Who will I work with at District Mortgage?
Alan Trombley, Principal Mortgage Loan Originator, NMLS #2805044, is your loan officer. He is licensed in the District of Columbia and handles every file from pre-qualification through closing.
Where do the rates on this site come from?
Our rates page is the source for our pricing. It shows an effective date, the APR next to 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 with them. They are not offers of credit or commitments to lend, and pricing changes daily. Anyone quoting a rate from us should cite the effective date it was published with.
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Related guides
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 only. This is not tax or legal advice. Confirm your own recording with your settlement agent.
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