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How Do I Avoid Mortgage Recording Tax in NY?

If you are purchasing property in New York City, you are probably already aware of what a costly venture it is. Not only are you looking at the cost of the property itself, but you are also responsible for closing costs, especially if you will be financing the property. 

Closing costs will involve everything from application fees and origination costs to appraisals and legal fees. One of those closing costs is the mortgage recording tax. It is important to speak with an experienced NYC real estate lawyer when dealing with real estate matters. A skilled lawyer will be able to help you understand your rights in the transaction and the costs you are likely to incur.

What is the Mortgage Recording Tax?

In the state of New York, if you obtain mortgage financing, both state and local governments will collect a mortgage recording tax that documents the mortgage transaction. This is separate from the other costs associated with the mortgage that you will be paying at closing. 

For condos and one to three-family homes, the borrower’s portion of the mortgage recording tax is 1.80% of the loan amount if the mortgage is less than $500,000. If the mortgage is $500,000 or more, the mortgage recording tax is calculated at 1.825% of the loan amount. On top of this, the lender is responsible for 0.025% of the loan amount.

Needless to say, this can be costly and will be imposed whether you are purchasing or refinancing. 

How to Avoid the Mortgage Recording Tax

If you are purchasing and financing a co-op, it is not subject to the mortgage recording tax. The tax is only imposed on financing of real property and a co-op is not considered real property. If you are purchasing a co-op in NY, you will not have to worry about paying the mortgage recording tax at closing. 

Another way to avoid or reduce the mortgage recording tax is through a CEMA or a Consolidated Extension and Modification Agreement. 

In a refinance situation, the mortgage recording tax can be greatly reduced or avoided when the original lender agrees to assign the existing mortgage to the new lender and the new lender agrees. The mortgage recording tax will only be calculated based on the difference between the old loan and the new money. This process can even be more streamlined when a borrower refinances with their original lender. 

A CEMA can also be used with a purchase mortgage in some cases if the two banks agree. In this case, instead of paying off the old mortgage at closing with the proceeds of the new one, the original lender can assign that balance to the new lender, and the new lender will then consolidate the original and new loans. A buyer will only pay the mortgage recording tax on the difference between the outstanding mortgage and the new mortgage. This can result in significant savings. 

Furthermore, a purchase CEMA can also benefit a seller by reducing the amount of their transfer tax. 

Getting the Legal Advice of an Experienced NYC Real Estate Attorney

Purchasing property in New York City can be complicated and costly. Having the assistance of an experienced NYC real estate attorney can help save costs and ensure that the entire transaction goes smoothly. 
If you are purchasing property in New York City, NYC real estate lawyer Natalia Sishodia and her team at Sishodia PLLC can help guide and advise you throughout the entire transaction. Call them at (833) 515-4646 or contact them through their online contact form.



Article Source : sishodia.com/how-do-i-avoid...
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