CEMA, or a Consolidation, Modification, and Extension Agreement, is created when the current property lender assigns the mortgage to the new lender during a real estate transaction. Your lender will work with the existing lender to modify the mortgage terms to reflect your new interest rate, maturity date, and new loan agreement. This process is complex and often requires a seasoned real estate attorney to complete, but it could result in enormous savings for you. The money you save isn’t recorded into the outstanding principal balance of the mortgage, affecting the amount of taxes you pay.

If you are considering a CEMA, you need to meet the following criteria:

• 1. The property must have an outstanding mortgage
• 2. The outstanding mortgage and potential savings need to make the CEMA cost-effective
• 3. The property’s seller must cooperate with the CEMA
• 4. Your bank and the seller’s bank must be willing to collaborate

If you think a CEMA will be worthwhile, you need to discuss it with the seller as soon as possible. It is best to include your intent in your initial offer to avoid extensive contract negotiations. It is important to note that while a CEMA can reduce transfer taxes in New York, most sellers will still want to split the mortgage recording tax savings with the buyer. If you don’t want to split the savings, make sure to detail your intent with your offer.

Remember that you may still need to pay mortgage taxes on the amount you are getting beyond the outstanding principal balance. This can still create significant cost savings for you, especially in states like New York.

Are you considering a CEMA? Our experienced staff is here to help! Call Empire today to learn more about CEMAs or open an order!