The Alabama mortgage tax is $0.15 for every $100 of loan principal, rounded up to the next full $100, and it’s paid once when your mortgage is recorded with the county probate court. On a $250,000 loan, that comes to $375. The document cannot be filed until the tax is paid, so it lands on your closing statement rather than a later bill.
How to Calculate It
Round the loan amount up to the next $100, divide by 100, then multiply by $0.15. A loan of $200,001 is taxed as if it were $200,100, because any fraction of $100 counts as a full $100.1Alabama Legislature. Alabama Code 40-22-2 – Mortgages, Deeds of Trust, Etc., Generally The rate is set by state law and is the same in all 67 counties.
A few worked examples:
- $150,050 loan: rounded to $150,100. 1,501 × $0.15 = $225.15.
- $250,000 loan: no rounding needed. 2,500 × $0.15 = $375.00.
- $327,620 loan: rounded to $327,700. 3,277 × $0.15 = $491.55.
HELOCs and Other Open-End Credit
Revolving instruments secured by Alabama real estate work differently. The filer picks one of two methods. The first taxes only the amount initially drawn, requires a bond to cover future draws, and obligates the lender to report additional draws each September and pay the tax then. The second taxes the full maximum credit limit stated in the instrument and pays it all upfront. In no case can the total exceed $0.15 per $100 of the maximum principal the instrument can secure at any one time.1Alabama Legislature. Alabama Code 40-22-2 – Mortgages, Deeds of Trust, Etc., Generally
Most lenders take the upfront route to avoid the bond and annual reporting. If your HELOC has a $100,000 limit, expect the tax to be calculated on the full $100,000 regardless of what you draw at closing.
Refinances and Loan Modifications
A full refinance with a new lender is a new instrument securing new debt, so the tax applies to the entire new loan amount at the standard rate.
A modification with your existing lender can escape the tax, but only in narrow circumstances. If the modification substitutes security for debt on which the tax has already been paid, and both the principal amount and the maturity date stay the same, no additional tax is owed. If the modification extends the maturity date or renews the indebtedness, the tax applies to the full amount extended or renewed, even when the balance is unchanged.1Alabama Legislature. Alabama Code 40-22-2 – Mortgages, Deeds of Trust, Etc., Generally Rate-and-term modifications that push out the payoff date fall into this second category.
Exemptions
Certain tax-exempt institutions can record mortgages without paying. When one does, the probate judge stamps “No Tax Collected” on the document and files it without the fee.1Alabama Legislature. Alabama Code 40-22-2 – Mortgages, Deeds of Trust, Etc., Generally
The exemption belongs to the institution, not the paper. If the instrument is later transferred to or filed by a party that isn’t tax-exempt, the probate judge collects the tax on the remaining unpaid balance before recording it.1Alabama Legislature. Alabama Code 40-22-2 – Mortgages, Deeds of Trust, Etc., Generally Federal agencies, state agencies, and certain credit unions commonly qualify. Claiming an exemption typically means submitting an Affidavit of Exemption with the mortgage, giving a sworn explanation of the legal basis. Have that paperwork ready before closing so recording isn’t delayed.
Not the Same as the Deed Transfer Tax
The mortgage recording tax is often confused with Alabama’s deed transfer tax, but they’re separate charges under different statutes. The deed transfer tax applies to the instrument conveying ownership, not to the mortgage. Its rate is $0.50 per $500 of the property’s value (or fraction thereof), and the taxable amount is reduced by any mortgage on which the mortgage tax has already been paid.2Alabama Legislature. Alabama Code 40-22-1 – Deeds, Bills of Sale, Etc.
So if you buy a $300,000 home with a $250,000 mortgage, the deed transfer tax hits only the $50,000 equity portion. That’s 100 × $0.50 = $50.00. The mortgage recording tax applies separately to the full $250,000. Both are paid at the probate court when documents are filed. Some deed transfers are exempt, including deeds executed for nominal consideration to correct or perfect title, and re-recordings of corrected instruments.2Alabama Legislature. Alabama Code 40-22-1 – Deeds, Bills of Sale, Etc.
Who Pays and Where It Shows Up
The statute doesn’t dictate whether the borrower or the lender bears the cost. It refers only to “the person offering the instrument for record” and “the owner of such instrument,” which technically means the lender. In practice, the mortgage tax is charged to the borrower as a closing cost in Alabama. A purchase contract can allocate it differently by agreement, but the borrower-pays default is the industry norm.
Federal disclosure rules require the tax to appear on both the Loan Estimate, delivered within three business days of your loan application, and the Closing Disclosure, delivered at least three business days before settlement.3National Credit Union Administration. Real Estate Settlement Procedures Act (Regulation X) Look for it under “Taxes and Other Government Fees.” Run the calculation yourself and compare. Fixing a mistake before you sign is far easier than fixing one after.
If the Tax Isn’t Paid
The probate judge will not accept the document for recording. Alabama law bars any mortgage or similar instrument from being filed until the tax has been paid.1Alabama Legislature. Alabama Code 40-22-2 – Mortgages, Deeds of Trust, Etc., Generally
An unrecorded mortgage is more than a paperwork gap. Alabama follows a race-notice recording system, so a recorded mortgage takes priority over unrecorded ones. If the lender’s mortgage never makes it into the public records, a later lien holder or buyer who records first and had no knowledge of the earlier mortgage can take priority. That is why lenders record immediately at closing and why the tax gets collected at the settlement table.