CEMA Vs Traditional Refinancing & Taxes; NYC Refinancing Tips

Refinancing a mortgage does not directly affect property taxes, but the terms of the new mortgage could impact how you pay them. The assessed value of your home, set by your local tax authority, is the biggest factor in determining your property tax bill.

Homeowners know all too well that property taxes literally come with the territory.  Several factors influence the amount you pay, including rates set by your municipality and the assessed value of your home. These factors are entirely out of your control. But, what  about things you can control — like refinancing your mortgage? Can that too affect your annual property tax bill?  After all, the two can be connected: a refinance does require a re-appraisal of your home’s worth, and property tax payments are often made as part of monthly mortgage repayments.  Is there a way to economize and reduce your NYC taxes?

Let’s face it, buying property and living in NYC comes with a pretty hefty price tag. On top of Real Estate fees, property taxes & closing costs, you’ll face a significant mortgage recording tax when it’s time to refinance.

Well . . . here’s some encouraging news.

New Yorkers can utilize a CEMA . . . Consolidation, Extension and Modification Agreement that can drastically reduce refinancing costs.  How?  A CEMA is a refinancing loan that only requires you to pay taxes on the difference between the principal balance on an existing loan and the new loan amount.  Putting it simply, a CEMA could save you a significant amount of your hard earned cash.  Why pay more tax than you need to?

In many cases, with (or without) a CEMA, refinancing gives you an opportunity to change the terms of your loan, access cash via a cash-out option or possibly lower your interest rate.  Life has a way of periodically changing our circumstances, so choosing to refinance a mortgage may very well be an ideal option to create a more comfortable financial atmosphere as your circumstances shift.

A CEMA refinance makes sense.  Traditional refinancing usually comes with hefty taxes attached. CEMA makes the most sense when refinancing loans with a high remaining balance, and when using the same bank/lender.  If refinancing means switching banks/lenders you may have to pay extra transaction and/or legal fees to take out a CEMA.  As with all financial transitions, you want to make sure to have expert guidance … far too often we only see that there were better options after the fact.

Be advised … not all banks/lenders provide a CEMA option.  For instance, Co-ops do not qualify for CEMA because New York does not collect mortgage recording tax on co-op ownership. This is due to the fact that personal shares in a co-op are not considered real estate.  So … even before you take out the initial mortgage it’s advisable to ask if that institution has CEMA options, it’s wise to think ahead.

There are two key aspects of a CEMA application to consider.  There are several fees that may be applied to a CEMA refinance. These mainly depend on your lender. If your lender works with CEMA loans and has agreed to process the loan, your fees will be significantly less.  However, if you’re working with a new lender, expect higher fees. Your current lender may charge a fee to assign the loan to a new lender. They may also charge legal fees. These vary from lender to lender, ranging from a flat fee to a percentage of the loan.  You need to realise a CEMA is not always the right choice when refinancing.  Take the time to explore your opinions and choose what’s going to best in each individual case.

The second thing to take into consideration is that a CEMA takes time to complete. New York mortgage & loan regulations may slow down the process, especially if you are changing banks/lenders. It can take 30 – 90 days from application to completion … patience is definitely required. If you’re in a situation where you need to refinance quickly, a conventional mortgage may be a better option.

If you’re refinancing in NYC, it may make more financial sense to apply for a CEMA loan. You may have to jump through more hoops, and it may take more time, but it could end up saving you thousands of dollars by reducing the amount of mortgage recording tax you’ll need to pay.

Money in your pocket is always so much sweeter than money paid out for no good reason.


Don’t fall behind on your financials, get help from R&J – NYC’s #1 mortgage & refinancing broker today and save huge sums of money.


Contributed By:

R&J Mortgage

Corporate Office: 80-02 Kew Gardens Rd Suite 1040, Queens, NY 11375

 

R&J Mortgage & Loan Brokers Manhattan NYC  31 W 34th St. #7162, New York, NY 10001 https://rjcmortgage.com/  

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