Refinance guide New York CEMA refinance to save mortgage tax

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What is a New York CEMA refinance and when it makes sense

A CEMA (Consolidation, Extension and Modification Agreement) is a New York–specific refinancing technique that lets a new lender “assume” or consolidate one or more existing recorded mortgages so the borrower avoids paying mortgage recording tax on the portion of the new loan that simply replaces outstanding debt. In practical terms, instead of recording an entirely new mortgage for the full refinanced amount (which is normally subject to mortgage recording tax), the CEMA documents the combination or modification of the old mortgage(s) and treats only any incremental new money as newly recorded — reducing the tax bill.

When it makes sense:

  • You are refinancing an existing NY mortgage primarily to lower your rate or term without pulling substantial cash out.
  • The outstanding balance of your existing recorded mortgage(s) is significant relative to the new loan amount, so mortgage recording tax on the incremental “new money” is small.
  • Your current lender(s) and the new lender are willing to sign the CEMA and cooperate on the assignment/consent paperwork.

Benefits and drawbacks

Benefits

  • Big tax savings: by applying mortgage recording tax only to new money, borrowers can save potentially thousands of dollars compared with a standard refinance in higher-tax counties.
  • Often the fastest way to make a rate/term refinance cost-effective in New York, especially in NYC and other high-mortgage-tax counties.
  • Can be combined with payoff of subordinate liens in some situations (if structured properly).

Drawbacks

  • Not all lenders offer CEMAs — some avoid them because of added administrative work and potential legal risk.
  • Added complexity: requires cooperation from the existing lender(s), title company and county recording office; can extend closing timelines.
  • Limited usefulness for large cash-out refinances — you’ll still pay tax on the new-money portion, and lenders may restrict CEMA for significant cash-out amounts.

Costs and fees

While a CEMA can cut mortgage recording tax, there are other fees to expect:

  • CEMA preparation fee or “CEMA rider” fee charged by the new lender or their counsel.
  • Attorney fees for drafting/review and coordinating assignments/consents.
  • Title company fees for the additional review and document handling; possible additional charges for simultaneous filings.
  • Assignment or payoff-related fees charged by the existing lender for consenting or assigning the mortgage.
  • Recording fees (county clerk), which are still payable on the new-money portion and for any required assignments/releases.

Net savings = the mortgage recording tax avoided on the replaced principal minus the combined CEMA-related fees. In many transactions this still results in substantial savings, but run the numbers up front.

Step-by-step process

Typical steps when pursuing a CEMA refinance:

  1. Ask prospective lenders whether they allow CEMA refinances. If the chosen lender does not, you’ll need to find one that will or do a standard refinance.
  2. Obtain a current payoff statement and a certified copy of the recorded mortgage(s) and any intervening assignments or endorsements from the existing lender.
  3. Title company and lender’s counsel review the chain of title, recorded instruments, and county recording requirements to confirm CEMA eligibility.
  4. New lender prepares the CEMA agreement (and related assignment/consent documents). The existing lender typically signs a consent or assignment so the CEMA can “step into” the recorded mortgage.
  5. Closing is scheduled. At closing, parties execute the CEMA, any assignments, the new note and mortgage documents. The title company coordinates recording and payment of mortgage recording tax on the new-money portion only.
  6. County clerk records the CEMA-related instruments and the newly consolidated mortgage; title company issues updates and the prior mortgage is satisfied in accordance with the CEMA paperwork.

Common pitfalls to avoid

  • Assuming every lender will do a CEMA — confirm in writing. Some lenders explicitly disallow CEMAs or impose strict conditions.
  • Miscalculating mortgage tax savings — use the exact outstanding principal per the payoff statement (not the original mortgage amount) and verify county tax rates before committing.
  • Neglecting subordinate liens — junior mortgages or liens that aren’t handled properly can complicate recording and tax computation.
  • Timing/recording errors — incorrect or late recording of assignments, releases, or the CEMA itself can trigger tax liabilities or title problems.
  • Relying on a recorded mortgage that is not in the proper form or name — older mortgages, MERS entries, or missing assignments may require extra work or make a CEMA impossible.

FAQ

Q: Can I use a CEMA if I’m taking cash out?

A: In many cases yes, but mortgage recording tax will still apply to the cash-out (the new-money portion). Lenders differ on whether they’ll permit CEMA on substantial cash-out refinances, so check lender policy early.

Q: Does a CEMA remove all mortgage recording tax?

A: No. A CEMA avoids tax on the portion of the new mortgage that replaces an existing recorded mortgage. Any new-money portion is still taxable. Exact savings depend on the outstanding balance and local tax rates.

Q: How much extra time does a CEMA add to closing?

A: It can add anywhere from a few days to a couple of weeks, depending on how quickly the existing lender signs consents/assignments and how busy the title company/county clerk are. Start the process early.

Q: What if my existing lender won’t sign the CEMA?

A: If the existing lender refuses, you generally can’t do a CEMA. You’d need to proceed with a standard refinance (and pay mortgage recording tax on the full amount) or find a different new lender willing to structure the transaction differently.

Before pursuing a CEMA refinance, ask your mortgage officer, title company, or an attorney to run the exact tax-and-fee comparison so you can see the net savings. With the right lender and clear paperwork, a CEMA can be a powerful way for New York homeowners to lower refinancing costs.

META: CEMA; New York refinance; mortgage recording tax; refinance savings; homeowner guide

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