Mortgage Taxes and Re-Financing-New York Borrowers

Did you know that there is a way to avoid mortgage taxes that increase the cost of re-finances? The technique known as a “consolidation, modification and extension agreement” (CEMA), and helps a refinancer to pay only the cost of the “new money” being borrowed.

To accomplish a CEMA, the borrower, the borrower’s attorney, and the lender prepare new documents which consolidate the old mortgage with the new mortgage. In the process, the old mortgage is assigned to the new lender, and the borrower pays mortgage tax on the “new money.” The original mortgage is not “discharged of record,” because the borrower arranges to keep the existing mortgage on the books and then assigns it to the new lender.

The new lender requires a new mortgage for the closing costs and new money, while the new lender and the old lender execute an agreement assigning the old mortgage to the new lender; and all of the debt is consolidated.

Beware, however, the process is complex and sometimes causes considerable time and expense to complete. Consult your local real estate attorney before undertaking a CEMA.