Ask this question to your potential lender : what is a CEMA? When you have the plan to refinance your house or condo in New York. The answer they give will let you know if the lender is really tuned to the market of real estate in New York or not. The reason is that you can save a large sum of money.
The Consolidation, Extension, and Modification Agreement is the abbreviation of CEMA, so for this reason your lender has to know of it as well in the way it brings benefit to you.
All counties in New York levies a tax of mortgage on mortgages recorded in its jurisdiction. Among property types as well from one county to another, rates are vary (commercial property, vacant land, two versus single family). For instance, in the county of Nassau, the tax for mortgage of a single family is 1.05% from the sum of the loan. In the city of New York the tax is 2.05% while above of that amount, the percentage is 2.175% for mortgage below $500,000. Note that there is a rise of $5,150, on a NYC house that costs $300,000.
Some out of state lenders are not wary about the mortgage tax in New York and lots may fail to include it in the disclosures of their loan. By reason of particular nuances and variability from one county to another that can influence the computation of the tax, others may approximate the sum incorrectly. At the closing table, many of these mistakes could lead to a surprise which is very unpleasant. A savvy lender in New York will not be cautious of the mortgage tax but may be aware to decrease the amount of your obligation at the time you refinance.
In this case, the CEMA has a role. For refinancing, a CEMA takes benefit of a loophole in the mortgage tax. Based on the sum of the secured obligation and the sum of the debt, article 11 from the tax law in new York compels the tax on each mortgage of actual property situated in New York. We can say that only the new money which has the tax. For instance, a borrower may wish to take out cash for house improvements through a new loan reaching $350,000 for a borrower with $300,000 mortgage. Note that the new funding would be $7,175 from $350,000 – which is the transaction from the mortgage tax, by using a straight refinance. Anyway, a CEMA asks the previous lender to extend his mortgage to the current lender who will have the mortgage modified and consolidate it to the loan with amount of more than $350,000. This ends in $50,000 of a recent debt as well obligation of a mortgage tax of $1,025.
Anyway, a CEMA asks the previous lender to hand over his mortgage to a recent one who will. Nowadays a lot of people are refinancing for getting a smaller rate of interest and not cashing out equity and in general a recent loan is often smaller than 5% from the previous one, quite sufficient for the expenses of refinancing. In the cases like that, using a CEMA can decrease the tax of mortgage into small change.
CEMAs are not something that are easy to catch. Even if some major lenders often comply, the actual lender has to be willing to permit the assignment. You must spend much time for handling the required paperwork for accomplishing a modification and an extension, usually from six to eight weeks, yet a lender with offices in New York (as appointed to a lender with based on internet who is licensed everywhere) is already accustomed to serpentines of the tax, have the CEMAs arranged regularly and will place a process to do that effectively. Make arrangement first, choose experienced lender in the process, and be patient a little bit. For you, the savings will be so useful.
