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If you’re refinancing a mortgage in New York there’s a unique financial tool that could save you thousands: CEMA, which stands for Consolidation, Extension, and Modification Agreement. This type of mortgage is specific to New York State and allows homeowners to avoid paying mortgage recording tax on the full amount of a refinanced loan.

Here’s how it works:

When you refinance, instead of recording an entirely new mortgage and paying the full mortgage recording tax again (which can be substantial), a CEMA allows you to combine your existing mortgage with the new loan amount. As a result, you only pay the mortgage tax on the difference between the additional funds borrowed and the unpaid balance of your original mortgage.

Who Qualifies for a CEMA Mortgage?

To be eligible for a CEMA mortgage:

  • You must currently have an existing mortgage on a property located in New York State.
  • You must be refinancing your home loan with a lender that agrees to participate in the CEMA process.

When Does a CEMA Make Sense?

A CEMA mortgage is most beneficial in higher-loan-amount refinances, where the potential mortgage tax savings outweigh the administrative fees involved in processing the CEMA. It’s especially worth considering if:

  • You’re refinancing a loan over $500,000 or more (savings grow with loan size).
  • You’re remaining with the same lender (a “same-lender CEMA” tends to be more straightforward).
  • You’re buying or refinancing in New York City or surrounding counties, where mortgage recording taxes are higher.

Drawbacks: Cost and Time

  • Complexity and Processing Time: CEMAs are more intricate than traditional refinances and can take longer to process due to the need for cooperation and coordination between the lenders and their legal teams. Expect a process that could take up to 75 days, compared to an average of 30 days for a traditional refinance.
  • Lender Fees: Lenders may charge additional processing, legal, and assignment fees to facilitate the CEMA process, which can range from a few hundred to a few thousand dollars. It’s crucial to compare these fees against the potential tax savings to determine if a CEMA is truly beneficial in your situation.
  • Not Always Available: Not all lenders offer CEMA mortgages, and not all sellers are willing to participate in the process, especially if it delays closing.

Let Quality Title & Abstract Agency assist with all of your title insurance needs. Give us a call at 732-440-1920. We’re here to help.