Understanding the Advantages of CEMA: A Buyer's and Seller's Guide

by Cristina Callegari Kanellopoulos

When you are obtaining a mortgage in New York State the buyer of that home typically pays mortgage tax on the whole amount of the mortgage that they obtain. The mortgage tax in New York State is usually the largest amount a buyer pays in closing costs. This tax can easily account for 40% of the closing costs paid when purchasing a home. The mortgage tax rate in the 5 boroughs of New York City is generally between 1.8 to 2.55%! This accounts for thousands of dollars in closing costs that the buyer of a home can avoid.

The Advantage of CEMA to Buyers:
The buyer can avoid this tax in part, or in whole by obtaining an assignment of mortgage from the seller of the property. The savings is dependant upon the amount of the seller's existing lien. This assignment of mortgage must be approved by both the sellers mortgage holder and the buyers new mortgage company.

The Advantage of CEMA to Sellers:
The seller of the home also benefits from the assignment. In most cases the seller will avoid paying the New York State transfer tax they are obligated to pay when selling a home. The New York State transfer tax rate is $4 per $1,000 of selling price. If the seller chooses to assign the mortgage on their home, and the lenders allow this assignment, the seller can save thousands just for signing the authorization.