We are an independent, advertising-supported comparison service. Our objective is to empower you to make confident financial decisions by giving you access to interactive tools and financial calculators, publishing original and unbiased content, and allowing you to conduct free research and information comparisons.
Issuers that Bankrate has partnerships with include American Express, Bank of America, Capital One, Chase, Citi, and Discover, among others.
You may be wondering if there will be a transfer tax when you refinance your house. The answer? It depends on where you live.
In some states like Texas, there’s no transfer tax at all. But in others the tax rate varies depending on the value of your property. So, it’s important to do your research before you refinance.
What is Transfer Tax?
Transfer tax, also known as a real estate conveyance tax, mortgage transfer tax, or documentary stamp tax, is a fee that’s typically paid when property changes hands. This usually happens during a sale, but it can also apply to other situations, like refinancing.
The jurisdiction and property value determine how much transfer tax you must pay. For instance, the transfer tax in Florida is computed at the rate of 70 cents for every $100 of the sales price, rounded to the next hundred. Therefore, the transfer tax you would pay on a $300,000 home refinancing in Florida would be $2,100.
Do You Pay Transfer Tax on a Refinance?
In most cases, you won’t pay transfer tax on a refinance. That’s because you’re not actually transferring ownership of the property. You’re simply replacing your existing mortgage with a new one.
However, there are a few exceptions to this rule. For instance, if you’re doing a cash-out refinance in some jurisdictions, you might have to pay transfer tax. With this kind of refinance, you can borrow more money than what your current mortgage balance is. The extra money is then paid out to you in cash.
If you’re considering a cash-out refinance it’s important to check with your lender or a real estate attorney to see if you’ll be responsible for paying transfer tax.
How to Avoid Paying Transfer Tax on a Refinance
If you’re worried about paying transfer tax on your refinance. there are a few things you can do to avoid it:
- Choose a lender that doesn’t charge transfer taxes. Some lenders will absorb the cost of transfer taxes for their customers.
- Refinance for a lower amount. If you’re taking out a cash-out refinance, try to borrow less money than you owe on your existing mortgage. This will reduce the amount of transfer tax you’ll have to pay.
- Move to a state with no transfer tax. If you’re planning on moving anyway, you might consider moving to a state that doesn’t have a transfer tax.
Whether or not you have to pay transfer tax on your refinance depends on where you live and the type of refinance you’re getting. If you’re unsure, it’s always best to check with your lender or a real estate attorney.
How they differ from other real estate taxes
Although it’s simple to mix them up, real estate transfer taxes are distinct from property taxes, estate taxes, and gift taxes.
- Property taxes are a regular levy levied on properties to fund local government operations. Property taxes frequently fund public works projects like building roads and schools.
- Estate taxes are paid when a deceased person’s assets, or estate, are given to their heirs. The assets may (or may not) include real estate.
- Gift taxes: If a person gives another person a gift of any kind of property without expecting anything in return, gift taxes are due as long as the gift exceeds a specific threshold.
According to Allen Popowitz, chair of the real estate practice at the Brach Eichler law firm in Roseland, New Jersey, “gift tax and estate tax are typically imposed on the transfer of property, pursuant to estate planning or upon death in accordance with the will.” When real estate is actually transferred, usually between a property owner and a buyer from outside the company, transfer taxes are levied. ”.
Stated differently, Tania Bartolini, a real estate attorney based in Fort Lauderdale, Florida, states that “estate and gift taxes are technically transfer taxes, but with different limitations and charges— and unlike real estate transfer taxes, they are paid to the IRS.”
How We Make Money
The offers that appear on this site are from companies that compensate us. Unless our mortgage, home equity, and other home lending products are specifically prohibited by law, this compensation may have an impact on how and where products appear on this website, including, for example, the order in which they may appear within the listing categories. However, this payment has no bearing on the content we post or the user reviews you see here. We do not include the universe of companies or financial offers that may be available to you.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Bankrate logo.
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve upheld this reputation for more than 40 years by assisting people in making sense of the financial decision-making process and providing them with confidence regarding their next course of action.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of the content we publish is objective, accurate, and reliable because it is written by highly qualified professionals and edited by subject matter experts.
Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate editors and reporters concentrate on teaching customers how to handle the intricate and dynamic housing market as well as this life-altering transaction. Our mission is to provide you with the assurance that you are making the greatest and most informed real estate decision possible, from the time you find an agent to the time of closing. Bankrate logo.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our goal is to give readers reliable, unbiased information, and we have established editorial standards to make sure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU — the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. Thus, you can be sure that the information you’re reading, whether it’s an article or a review, is reliable and reputable. Bankrate logo.
Do You Pay Taxes on a Cash Out Refinance?
FAQ
Do I pay taxes when I refinance my house?
Who is exempt from transfer tax in NY?
Who must pay Pennsylvania’s transfer tax?
Do property taxes increase when you refinance?
How are transfer taxes paid in a refinance?
Generally, transfer taxes are paid when property is transferred between two parties and a deed is recorded. In a refinance transaction where property is not transferred between two parties, no deed transfer
Does a lender charge transfer tax in a refinance transaction?
Transfer tax in a refinance transaction? — Property Legal Counsel Does a lender charge deed transfer taxes in a refinance transaction? Short answer: No. Generally, transfer taxes are paid when property is transferred between two parties and a deed is recorded.
Does refinancing affect taxes?
Unfortunately, there’s no cut-and-dry answer here. Refinancing may or may not affect your taxes, depending on what type of refinance you used and how you file. As a general rule, your mortgage only impacts your taxes if you itemize your deductions. And, if you used a straightforward rate-and-term refinance, there likely aren’t any tax implications.
Are deed transfer taxes due in a refinance transaction?
In a refinance transaction where property is not transferred between two parties, no deed transfer taxes are due. When the same owner (s) retain the property and simply complete a refinance transaction, no new deed is recorded; therefore no new deed transfer taxes are paid.