Mortgage Registration Fee Places Unfair Tax Burden on Borrowers
Did you know that Kansas is one of only nine states that impose a fee, which Kansas courts have declared a tax, on purchasers of real estate when they take out a loan to finance that purchase? A person who has cash to purchase a home or land isn't required to pay the tax. Additionally, borrowers who utilize government sponsored lenders, such as Farm Credit are not subjected to the mortgage registration tax. In other words, the mortgage registration tax is not fairly applied to all borrowers, let alone to those who use cash to make their purchase. In Kansas, purchasers of real estate requiring financing from a community bank, savings and loan, or credit union must pay a tax of $0.26 per 100 dollars of indebtedness . On a typical $150,000 home loan it adds an additional $390 to the borrower's closing costs. On a farm or commercial real estate purchase it can literally add thousands of dollars to the borrower's closing costs. Almost all of the tax, ($0.25 per $100 borrowed), goes directly to the general fund of the county where the property is located.
This begs the question: why does Kansas tax policy discriminate against certain individuals who need to borrow money to purchase real estate? This tax singles out a small segment of the population for unfair tax treatment. It isn't a coincidence that 41 states across the nation don't impose this tax. A mortgage registration tax penalizes those who seek to invest in their community and grow equity for their future.
The mortgage registration tax should not be confused with the mortgage recording fee that is also paid by the borrower. The mortgage recording fee is also payable at closing and was specifically established to cover the costs associated with recording mortgage documents. The mortgage registration fee (K.S.A. 79-3102) that we are working to repeal is a tax in addition to the mortgage recording fee ( K.S.A. 28-115). Since both are required to be paid before the mortgage is filed, a borrower essentially pays twice to record the same mortgage.
The Kansas Bankers Association is part of a coalition working to eliminate this unfair tax to bring equity to Kansas borrowers. Fair tax policy is possible and now is the time to level the playing field for all Kansans.
Chuck Stones, President/CEO
Kansas Bankers Association