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The Ultimate Guide To CEMA Loan And Its Pros And Cons

The Ultimate Guide To CEMA Loan And Its Pros And Cons

Amanda Byford
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About CEMA Loan

If you are looking to refinance your current mortgage or acquire a new one to buy a new home in New York, you are required to pay mortgage recording tax as per state laws. 

Mortgage recording tax could be one of the major portions is the cost of refinancing or acquiring a mortgage. 

For New Your residents, there is a loan option where they can save on the mortgage recording tax. In this post, we will understand what is CEMA loan in detail.

What Is A CEMA Loan?

CEMA, also known as Consolidation Extension and Modification Agreement is a loan option available to New York residents that can excessively reduce the cost of refinancing their mortgage. 

In CEMA loans the borrowers have to pay the mortgage recording tax on only the unpaid mortgage balance (The difference between the current mortgage balance and the new loan amount).

New York State collects recording tax to record a new mortgage unless the property is a cooperative unit. 

Along with the state tax, New York City, Yonkers, and various counties impose additional local taxes to record a mortgage. 

In New York City, this mortgage recording tax is 1.8% if your loan amount is less than $500,000 and 1.925% if the mortgage balance is $500,000 and more. 

If you are refinancing your mortgage in New York, you can save a good amount of money with the help of a Consolidation Extension and Modification Agreement loan.

What Are Consolidation Extension and Modification Agreement Loan Requirements?

The most immediate requirement for this type of loan is that you must live in New York State. 

CEMA loans are available for refinances, FHA, and jumbo loans only. This type of loan is not available for VA loans. 

CEMA loans are often used in place of traditional refinancing, but they are a very rare type of loan for new home buyers.

Most housing types and lifestyles are eligible for the Consolidation Extension and Modification Agreement loan, except for co-ops. 

New York State does not levy mortgage taxes on co-ops because individual co-op shares are not considered real property. 

Finding a lender that offers CEMA refinancing can be difficult, and you should make sure that the lender you choose does. 

Ask if your current lender offers this type of loan before you find a new lender.

What Are The Pros and Cons Of A CEMA Loan?

Since we know what a Consolidation Extension and Modification Agreement loan in New York is, let’s understand if this type of loan is right for you. 

As we all are aware that every loan comes with pros and cons, and you might want to look into this type of loan to make the right decision.

Pros:

Buying a new home is not cheap, and buying one in New York State real estate is very expensive, especially if you are looking to get one in NYC. 

Hence, this type of loan can help you to save a good amount of money in terms of mortgage recording tax.

Instead of refinancing a mortgage traditionally, choosing a CEMA mortgage to refinance can save you thousands of dollars upfront. 

You can also benefit from lower interest rates and lower closing costs with Consolidation Extension and Modification Agreement loans.

Cons:

A CEMA mortgage refinance can save you money in most cases, but getting one could be a time-consuming process. 

New York State and your lender are required to follow specific procedures to process mortgages and transfer titles under CEMA regulations, so you only have to pay tax on the new amount in the transaction, not the full principal.

 This means that CEMA mortgage refinancing requires a little more patience than regular refinancing as closing loans can take up to 60-90 days. However, they will continue to provide you with information throughout the process.

Conclusion

CEMA mortgage refinancing is one of the best options for residents in New York State looking to refinance their mortgage. You need to have patience if you decide to get this type of loan. 

If you need want to close your refinance faster, you might want to consider going with the traditional method of refinancing. 

However, keep in mind that going with the traditional method means paying additional mortgage recording tax.

Amanda Byford

Amanda Byford has bought and sold many houses in the past fifteen years and is actively managing an income property portfolio consisting of multi-family properties. During the buying and selling of these properties, she has gone through several different mortgage loan transactions. This experience and knowledge have helped her develop an avenue to guide consumers to their best available option by comparing lenders through the Compare Closing business.

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