In New York State, when taking out a mortgage, a  recording tax  must be

paid to the State and some municipalities.  Figure that, paying tax on

borrowing money!

 

The fee can be from .75% to 2.8% of the mortgage amount, adding up to

thousands of dollars.

 

When refinancing a mortgage on a condo or 1-4 family home, the borrower can

usually get away with not paying this tax again by doing an assignment of the loan

from the first bank to the new bank they are getting the loan from. This is

called a CEMA, which stands for Consolidation, Extension and Modification

Agreement. The way it works is the first bank is notified of the refinance

and the terms.  Documents are prepared to assign the loan to the new lender

under the new terms. This also occurs if one is to refinance with the same

bank.

 

With home prices so high and closing costs monumental, a system has been

devised to have the seller’s lender assign their existing mortgage to the

buyer’s lender.  This acts the same way as a refi and can save the buyer

thousands of dollars in closing cost.  The seller can save on transfer tax ($4/1,000 of the purchase price)for the existing lien they assign up to $2,000. This can make it very

enticing for the seller to cooperate.

 

When doing this, all parties need to be involved from the beginning. It

takes time and coordination to complete this task in the timeframe of the

closing.  Both lenders need to agree to doing this, because they are not

required to do so by law.

 

When listing your home for sale, tell your realtor to add this as a bonus to

buyers. When buying a home, ask your realtor to discuss this with the

seller. Lastly, ask your attorney to do this as part of their representation

or for an additional fee.  You will save tons in closing costs!

 

 

Dale Siegel