For years, each time a client in New York State decided to refinance their home, they would pay a New York State mortgage tax on the entire new loan amount.
But living in the Empire State shouldn’t have to mean paying a lot of taxes to refinance YOUR empire. Thankfully for residents of New York, there’s a workaround when you are refinancing called CEMA loans.
What’s a CEMA Loan?
Instead of paying thousands of dollars in taxes, clients can obtain a Consolidation, Extension and Modification Agreement, or CEMA loan. Quicken Loans is pleased to offer CEMA loans because clients only have to pay taxes on the amount of the new loan that is above and beyond their current unpaid principal balance, such as closing costs or cash out.
CEMA loans are only available on conventional, jumbo and FHA refinances. VA loans are not available.
The CEMA loan can help to reduce the amount of money a borrower pays in New York state mortgage taxes. Here’s an example:
- Loan amount = $300,000
- Financed closing costs = $8,000
- County tax rate = 2.05%
Without CEMA: Loan amount of $300,000 x 2.05% tax rate = $6,150 total tax
With CEMA: Financed closing costs of $8,000 x 2.05% = $164 total tax + CEMA fees
What You Need to Know About CEMA
CEMA can save you a lot of money on a refinance in New York State. However, it’s important to know what to expect in terms of fees and closing times.
Understanding CEMA Fees
One thing to note is that CEMA loans have some additional fees involved that could make it less advantageous. Fees vary for individual loans but can range anywhere from a few hundred dollars to a few thousand dollars. These fees typically cover CEMA assignment fees, closing fees and processing fees. If the CEMA fees totaled $1,120 in the example above, the homeowner would clearly benefit from using a CEMA loan.
However, it’s important to note that CEMA loans may not always be a good fit, as tax rates and attorney fees vary, meaning that a non-CEMA loan may be less expensive in the long run. But most clients looking for cost-effective refinancing should find that a CEMA loan makes perfect sense.
Longer Closing Times
While CEMA does save you money in many cases, it’s not necessarily the quickest process. The state of New York and any previous lender must do some special signing off in order to get the mortgage and title transfers processed under CEMA regulations, allowing you to pay taxes only on the new money in the transaction rather than the full principal balance.
This means that CEMA refinances are going to require a little more patience than your typical refinance. It may take anywhere between 60 and 90 days to close your loan. However, they’ll keep you updated throughout the process.
If for some reason you really need your loan to close quickly, you can take a look at regular refinances. Just be aware that you could pay additional taxes in exchange for that speed.
So New York homeowners can start spreadin’ the news that CEMA is now available at Quicken Loans! Get started on your home loan today! If you’d prefer to get started over the phone, you can talk to one of our Home Loan Experts by calling (800) 785-4788. Feel free to leave your questions in the comments below.
New York – Quicken Loans Inc., 1050 Woodward Avenue, Detroit, MI 48226, Licensed Mortgage Banker – NYS Banking Department
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