Mortgage transactions in New York State often use an instrument known as the New York Consolidation, Extension and Modification Agreement (the "NY CEMA"). The CEMA is a provision by when refinancing a mortgage in New York the borrower is required to pay only the difference between the tax on the previous mortgage and the new mortgage. This is beneficial to the borrower for he does not have to pay the mortgage tax again on the entire amount of the new loan.
- New Mortgage: $500,000
- Mortgage tax in Queens, Brooklyn and other city counties is 1.8% ($9,000)
- The old Mortgage is $400,0000, or approximately $100,000 cash out
- The borrower only pays mortgage tax on the cash out
- Savings results in about $7,200
- Note: The old bank will charge a fee to release the necessary documents to the title company
The CEMA combines into one set of rights and obligations all the promises and agreements stated in existing notes and mortgages secured by the premises, including, if new funds are advanced to the borrower as one consolidated new note and mortgage. The result is that the borrower has one consolidated loan obligation that is paid in accordance with the terms of the CEMA. When the mortgage is documented, a consolidated note must be executed by the borrower. The consolidated loan terms, as stated in the CEMA are restated in the consolidated note.
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