Intangible Tax and Lender Loyalty: Knowing this Loophole can Save You Hundreds when Refinancing

avoidtaxOne of the truths we all learn as adults is that the only certainties in life are death and taxes.  All of us know taxes are paid when we buy or sell property. What most people are not aware of, but are almost universally not surprised by, is when refinancing borrowers are charged taxes again. Specifically, an “intangible tax” of $3.00 per $1000.00 of the loan amount in Georgia and most other states. (Georgia Department of Revenue Site Regarding Intangible Tax) and (OCGA 48-6-61)  In all cases this tax is unavoidable  but smart homeowners can avoid most of it if they know the law.

 In Georgia and some other states there is a loophole that can save you hundreds by allowing you to pay a reduced rate on the intangible tax rate.  Knowing this loophole exists is often vital since in our modern economy loan officers and lenders are frequently in different states than their borrower clients. While loan officers are very well versed in federal regulations they often are not as adept with state law loopholes like this one, so it’s important to ask when refinancing.  This savings IS NOT retroactive and unless you use it at the time of closing you lose it!

When refinancing with the same lender you are only required to pay the difference between your current loan amount and the amount of the old loan you are paying off, in this example the borrower would save over $1000.00:

Example 1: Refinancing with a Different Lender

New Loan Amount with Bank A: $350,000.00

Payoff for Current Loan with Bank B: $345,000.00

Since Banks ARE NOT the same Intangible Tax Paid on Entire New Loan Amount: $1,050.00

** 350 (thousand) x 3 (dollars per thousand) = $1,050.00

 

Example 2: Refinancing with Same Lender

New Loan Amount with Bank A: $350,000.00

Payoff for Current Loan with Bank A: $345,000.00

Since Banks ARE the same Intangible Tax Paid on Entire New Loan Amount: $15.00

** Intangible Tax Paid on the Difference Between the Payoff Amount and New Loan Amount

350,000.00 – 345,000.00 = 5,000.00

5 (thousand) x 3 (dollars per thousand) = $15.00

What if my Loan has Been Sold since I Got It Originally?

Good Question! As with most legal situations an attorney will tell you it depends and in this scenario that’s definitely correct. When the loan has not been sold or changed hands between banks the answer is simple, however, when the loan has changed hands generally the current lender holding the loan is the one you would need to refinance with in order to get the intangible tax savings.

If you have any questions please call the office or email any of our attorneys. We appreciate the chance to speak with you and earn your business by saving you money wherever we can!

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