What Is a CEMA Mortgage?

A CEMA mortgage can help cut mortgage taxes.

A CEMA mortgage can help cut mortgage taxes.

The whole point of a home refinance is to help you save money in the long run, so it only stands to reason that you’d be just as interested in saving cash on the front end of the deal. If you’re doing a refi in New York, state mortgage taxes can drive up the cost of a new mortgage. A consolidation, extension and modification agreement, or CEMA, mortgage can help cut the taxable portion for New York homeowners.


Instead of closing an old mortgage and opening a new one when you refinance, a CEMA combines the old and new mortgage into a single consolidated loan. Because of this, you won’t need to file a cancellation on your current mortgage, and, in turn, you won’t need to file a new mortgage, which comes with its own bundle of mortgage taxes. You won’t completely dodge taxes with a CEMA mortgage, as you’ll owe taxes on the amount of new money taken out of your home.


A CEMA mortgage can deliver significant savings, depending on the size of your new mortgage and the county in which you live. Mortgage tax rates vary around the state, with homeowners in New York City paying 1.8 if their mortgage value is $500,000 or less, 1.925 percent for more expensive homes. If you live in Westchester, Rockland or Ulster county, expect to pay 1.05 percent in taxes. Everywhere else in the state is subject to the state mortgage tax rate of 0.8 percent.

Savings Example

If you purchased a Manhattan two-bedroom for $1.2 million, paid off $200,000 in your mortgage and now want to refinance and get a lower rate, you’re looking at $1 million that can be subject to mortgage recording taxes -- to the tune of $19,250 in taxes. If you take out a CEMA mortgage, you’ll only owe taxes on the $200,000 difference between the two mortgages, the “new money,” that’s subject to taxes. You’ll pay a mere $3,850 in mortgage taxes, saving yourself $15,400 in extra taxes.


If you’ve already paid off your home and are looking to use your home as collateral for a pile of cash, you’re out of luck: You need an existing, non-discharged mortgage from which to start. While you can significantly save on taxes, you’ll pay additional fees when you close on your new mortgage. Because you’ll need to pay attorney and bank fees for two loans, this can be much steeper than just a straight refinance. Expect to pay between $2,000 and $4,500 in fees when you take out a CEMA, according to Quality Title & Abstract Agency.


About the Author

Wilhelm Schnotz has worked as a freelance writer since 1998, covering arts and entertainment, culture and financial stories for a variety of consumer publications. His work has appeared in dozens of print titles, including "TV Guide" and "The Dallas Observer." Schnotz holds a Bachelor of Arts in journalism from Colorado State University.

Photo Credits

  • Jupiterimages/Photos.com/Getty Images