Mortgage Registration Tax in Minnesota on Mortgage Modifications
When filing a mortgage, determining the amount of mortgage registration tax (“MRT”) is relatively simple. Except in the counties of Ramsey and Hennepin, MRT is calculated by simply multiplying the amount of the debt secured by the mortgage by .0023. In Ramsey and Hennepin, the calculation is the same except the multiplier is .0024.
Determining whether or not MRT is due and payable when a mortgage amendment or modification is filed may not be as simple. Under Minnesota Statutes Section 287.05, subdivision 8, no MRT is due if the amendment does not secure new or increased debt. Thus, if the purpose of a mortgage modification agreement is to add new property to be encumbered by the mortgage lien or to require a real estate tax escrow, it’s clear that no additional MRT is due.
However, what happens when your mortgage originally secured $100,000, it’s now paid down to $25,000 and the borrower wants to borrow an additional $50,000. Assuming your original loan was a term loan, the result of this would be that MRT is now due and payable on the additional $50,000 being advanced to the borrower. This is required because, despite the fact that the new amount secured is still less than the original $100,000, the additional $50,000 is both new debt and an increase from the paid down original amount secured by the mortgage. On the other hand, if the original loan was a revolving line of credit, no MRT would be due on the additional $50,000 so long as your original mortgage contained the statement that the mortgage secures a revolving line of credit under which advances, payments and readvances may be made from time to time. This is the case because the additional $50,000 is a continuation of the existing debt secured by the original mortgage, making it neither new or an increase.
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