Looking to Refinance in New York? You Might Save Money with a CEMA

If you live in New York and want to refinance a mortgage on your property, you may take advantage of a special type of loan, a Consolidation, Extension and Modification Agreement (“CEMA”). A CEMA allows you to only pay mortgage recording tax on the difference between your original mortgage and the refinance, rather than the entirety of the new loan—which can result in some serious savings.

What is the Mortgage Recording Tax?

The mortgage tax is a fee charged by both the State of New York and whichever county you live in for the "privilege" of recording your mortgage.

What Are You Paying to Record?

A mortgage transaction involves two important documents, amongst others: the promissory note, the promise to repay the amount borrowed, and the mortgage, the security instrument that enables the bank to foreclose on the property in the event that you default on the promissory note. The mortgage is recorded in the public records of the county where the property is located. In New York, mortgage recording tax is calculated based on the face amount of the mortgage.

How Does a CEMA Save You Money?

Say the face amount of your current mortgage is $700,000, but you want to refinance and obtain a new loan in the amount of $750,000. For your CEMA refinance transaction, while you will execute a new note for the entire new loan amount ($750,000), you will sign a new mortgage for only the amount of the new loan that exceeds the face amount of your existing mortgage ($50,000).

Since you’re only paying mortgage recording taxes on the amount of your new mortgage ($50,000) rather than the full new loan amount ($750,000), you save on recording taxes. In the event that the new mortgage is not with the same lender holding your current mortgage, that mortgage will need to be assigned to your new lender.

For Example

The combined rate (county and state) for residential property in NYC is:

  • 2.05% for loan that’s $500,000 or less
  • 2.175% for loan that’s $500,001 or above

Your mortgage lender will often kick in .25% of the mortgage recording tax, making the actual rate you pay:

  • 1.8% for loan that $500,000 or less
  • 1.925% for loan that’s $500,001 or above

If you live outside NYC, the rate can be anywhere from .75% and up depending on your specific county. You can get the combined county and state rate by calling your local County Clerk’s office.

New York City Property
Original Mortgage: $700,000
Refinance Loan Amount: $750,000
Difference: $50,000

Lender Doesn’t Pay any of the Mortgage Tax
CEMA Recorded Mortgage: $50,000 x 2.05% = $1,025
Recorded Mortgage on Full Refinanced Amount: $750,000 X 2.175% = $16,312.50

That’s $15,287.50 in savings!

Lender Pays Part of the Mortgage Recording Tax
CEMA Recorded Mortgage: $50,000 x 1.8% = $900
Recorded Mortgage on Full Refinanced Amount: $750,000 X 1.925% = $14,437.50

That’s $13,537.50 in savings!

The New York City Department of Finance website has a mortgage tax calculator to help you figure out the tax. Check it out here.

The Bottom Line

CEMA’s can be a significant boost to your bank account, especially in places where real estate is expensive and the mortgage recording tax is high, like NYC. But, it’s also important to do your homework.

CEMA’s come with their own set of costs, including assignment fees, closing fees and processing fees. Although these rarely outweigh the benefit of refinancing with a CEMA, it’s important to weigh all your options.

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