Every buyer who finances a house or condo in New York City pays mortgage recording tax. On a 1-3 family home or condo, the borrower's share is 1.8% of the loan for loans under $500,000 and 1.925% at $500,000 and above. On an $800,000 loan that is $15,400, due at closing, on top of everything else.
A Purchase CEMA (Consolidation, Extension and Modification Agreement) lets the buyer avoid most of that when the seller still has a mortgage.
How it works
Instead of paying off the seller's loan at closing, the seller's lender assigns the existing mortgage to the buyer's lender. The buyer's lender then consolidates it with the new money into a single loan. Tax is only due on the new money, because tax was already paid on the assigned balance when the seller recorded it.
What it saves
Take a buyer borrowing $800,000 on a Sheepshead Bay two-family where the seller still owes $500,000. Without a CEMA the tax is $15,400. With one, it applies only to the $300,000 of new money, about $5,775. That is roughly $9,600 saved.
What it costs
CEMAs add legal work. Both attorneys charge more, and the seller's lender charges an assignment fee. They also take longer, because the seller's lender has to produce the original note and assignment documents. On most loans above $500,000 the savings are still several times the cost.
Why sellers should care
The buyer saves the tax, but the seller controls whether a CEMA can happen. That is why the best time to raise a CEMA is when the listing goes live, not after contract. A listing agent who can advertise CEMA savings gives buyers a reason to stretch on price, and many deals split the savings through the contract price.
When a CEMA does not work
- Co-ops: share loans are not recorded mortgages, so there is no tax to save.
- Sellers with no mortgage or a very small balance.
- Some lenders and servicers that refuse or delay assignments.
- Very tight closing timelines.
Want to know if a specific listing qualifies? Send us the address and we will check the seller's recorded mortgage and estimate the savings.