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What is a CEMA and how does it work?

When you select a CEMA, you will likely have lower recording tax costs. The state charges a recording cost to process a mortgage and submit public record documentation for the property. However, by borrowing mortgage funds with a CEMA, you can lower your fees for the documentation process. In some cases, a seller will use the funding option to refinance New York State property that they currently own. With a CEMA, they’ll pay taxes on the cost difference between their new and old financial agreement instead of paying taxes on the entire new loan amount. Furthermore, the agreement permits a renewal of the existing mortgage’s financing terms.
If you decide to refinance a property with a CEMA, then the process will combine your rights and obligations from your original agreement with your new financing terms.

About New York’s Recording Costs

In New York State, recording costs can be a substantial part of your property’s closing expenses. For instance, in upstate New York, the area’s mortgage recording taxes fluctuate from .75 to 2.8 percent for your mortgage. However, by qualifying for a CEMA, you are likely to reduce those exorbitant costs. In fact, you may save thousands if you live in counties like Rockland, Dutchess, Ulster or Westchester. Keep in mind that your current lender and the lender’s lawyer will charge you a CEMA transaction fee.

Calculation Tips

To determine the amount that you will save, calculate your full costs without a CEMA. The first step is to multiply your mortgage recording tax rate by your new loan total. Then, calculate your mortgage tax by deducting your initial mortgage amount from your new amount. The next step is to multiply the difference by your original tax rate. You should then deduct the tax amount with the CEMA included from the amount without it to establish your savings.

Regulations to Consider

If you’ll be refinancing your New York State property through Freddie Mac, then make sure that your mortgage attorney or professional uses the most up-to-date CEMA that is available.

CEMA Benefits

Keep in mind that the CEMA process may take a long time as your initial lender will need to track down your original note and mortgage documents for your new financing company. During a property financing transaction, be sure to review the benefits of NY CEMA as the program can save you money.

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