What is a Mortgage Tax?
The mortgage tax is a little-known tax that is wrapped into a package in addition to various other taxes and costs you will pay when buying or refinancing a home. It is unrelated to home mortgage interest rates and property tax yet is paid when you get a mortgage, to record the loan transaction.
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The mortgage tax is a state-enforced tax (prices differ by state) and you will certainly pay this tax if you stay in Alabama, Florida, Kansas, Minnesota, New York, Oklahoma, Tennessee, Virginia or Washington, D.C. Currently this tax is not enforced in the other 42 states.
When buying a home, the best practice, in any state, is to do your research. If you live in a state that imposes a mortgage tax it is a
good idea to contact your state to find out what rate you will pay. Some states charge as low as 12 cents each $100 of the amount of money you are borrowing from the lending institution.
If you are re-financing your home, you may be able to save on the mortgage tax. If the financing company will permit this, the original mortgage tax could transfer to the brand-new lending institution. It is a good idea to explore various loan providers to determine if you could possibly save you money.
Whether you are purchasing a home or refinancing you it is a good idea to pay the mortgage tax in advance. Otherwise, you will be hit with fees and a floating rate of interest on any unpaid document.
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