Maryland Property Taxes, Insurance and Closing Costs in DSCR Math

Where taxes and insurance fit in the ratio

DSCR stands for debt service coverage ratio. Lenders usually compute it as monthly rent divided by PITIA: principal, interest, taxes, insurance and association dues. Principal and interest come from your loan terms. The other pieces come from the property, and in Maryland they vary more from place to place than many investors expect.

Here is a worked example with user-style inputs. A rental leases for $2,300 a month. Principal and interest from your quote are $1,400. Annual taxes are $3,600 ($300 a month), annual insurance is $1,440 ($120 a month), and there is no HOA. PITIA is $1,820, and the DSCR is about 1.26. If the same house sat in a jurisdiction with taxes of $6,000 a year ($500 a month), PITIA would be $2,020 and the DSCR would fall to about 1.14. Same house, same loan, different ratio.

How Maryland property taxes work

The Maryland State Department of Assessments and Taxation (SDAT) assesses real property, generally on a three-year cycle, and publishes assessments online. Counties and Baltimore City set their own tax rates, and incorporated towns and cities can add a municipal rate on top. The state also levies a small statewide rate. The result is that two similar houses a mile apart can have quite different tax bills.

For context, the statewide median real estate taxes paid is $4,144 a year, with medians of $3,468 in Baltimore City, $4,864 in Prince George's County and $5,861 in Montgomery County (general market benchmark, not a loan offer; source: U.S. Census Bureau, ACS 2024 1-year estimates). Those are medians across all homes; your property may be very different. Baltimore City's combined rate is higher than surrounding counties', which is why lower city prices do not always mean lower tax bills.

Insurance: the Maryland variables

• Older housing. Rowhouses and older homes with original wiring, old roofs or outdated plumbing can cost more to insure or need updates first.
• Flood zones. Properties along the Chesapeake Bay, its tidal rivers and the Atlantic coast often sit in FEMA flood zones, and lenders require flood insurance in special flood hazard areas. Check the FEMA Flood Map Service Center before you make an offer.
• Wind exposure. Coastal properties on the Eastern Shore and in Ocean City may carry wind or hurricane deductibles and higher premiums.
• Condos. Condo owners pay their own unit policy in addition to the association's master policy, which is funded through dues.
• Landlord coverage. A rental needs a landlord (dwelling fire) policy, not a homeowner policy, and many lenders require loss-of-rents coverage.

Recordation and transfer taxes at closing

Maryland charges state transfer tax plus county or Baltimore City recordation and transfer taxes when property changes hands, and recordation tax can also apply to some refinances. Who pays what is a matter of local custom and the contract. In high-priced counties these taxes can be a meaningful share of closing costs. They do not affect the monthly ratio, but they do affect how much cash you need, which in turn affects whether you meet reserve requirements.

Ask for a full closing-cost estimate early, before you lock in your down payment. If cash is tight, a slightly smaller loan with a lower payment may be easier to close than a larger loan that leaves you short on reserves.

HOA and association dues

Townhomes and condos are common in Montgomery, Howard, Anne Arundel and Charles counties and in Ocean City. Association dues go straight into PITIA. A $300 monthly condo fee has the same effect on the ratio as $3,600 a year in additional taxes. Some Columbia properties also pay an annual Columbia Association charge; convert it to a monthly amount and include it. See the Howard County page.

Putting it together

Before you write an offer on a Maryland rental, gather four numbers: a realistic rent, the SDAT-based tax estimate, a real insurance quote (including flood where needed) and any association dues. Add a quoted rate and loan amount, and run the DSCR calculator. Then build a separate cash budget for closing costs, recordation and transfer taxes, licensing and lead compliance. When both work, send the scenario and we will compare wholesale lender options. For a broader view of the state, see the Maryland market overview.