CEMA Loans in NYC: How to Cut the Mortgage Recording Tax
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A CEMA, short for Consolidation, Extension and Modification Agreement, combines an existing mortgage with a new one so New York’s recording tax applies only to the new money, not the whole loan. It’s common on refinances and possible, though rarer, on a purchase. On a $1,000,000 deal with a $600,000 balance, it can save roughly $8,500 net of fees.
We represent NYC buyers, and a CEMA is the one legal way around the city’s largest closing cost. It only works on real property, and every lender involved has to agree.
It’s a merger, not a new mortgage pretending to be modest.
What a CEMA actually is
Refinancing normally means paying mortgage recording tax on the entire new loan amount, even though you already paid it once on the original. A CEMA merges the old loan and the new one into a single instrument, so the tax applies only to the increase.
Take a Brooklyn refinance from a $300,000 balance to $450,000. Without a CEMA, that’s roughly $8,100 in recording tax. With one, about $2,700, an example Friedman Vartolo’s own CEMA explainer runs through independently. The bigger the existing balance relative to the new loan, the bigger the saving.
Our refinance guide covers the rest of that decision, and pricing a rebate into your next move is worth doing alongside it.
Purchase CEMA, the rarer and bigger version
Sometimes a buyer can use a CEMA too. The seller’s old loan does the buyer a favor on its way out. Instead of paying off the seller’s mortgage and originating a fresh one, the buyer’s new lender takes an assignment of the seller’s existing position. The buyer pays recording tax only on the gap between the seller’s old balance and the new loan.
| Without CEMA | With a purchase CEMA |
|---|---|
| Tax on the full new loan amount | Tax on the increase only |
| $800,000 loan, ~$15,400 tax | Same loan, seller had $600,000 outstanding: ~$3,850 tax |
| Simple, no seller involvement | Seller, seller’s lender, buyer’s lender, and title company all must agree |
If the buyer’s new loan is equal to or smaller than the seller’s existing balance, no mortgage recording tax is owed at all.
Consolidation extension modification agreement, spelled out
The tax that doesn’t care whether you already paid it once is the mortgage recording tax, and a CEMA is its narrow, legal exception. “Consolidation” merges the old debt and the new into one instrument. “Extension” and “modification” update the term and terms without creating a second, separately taxed loan.
Our full guide to the NYC mortgage recording tax covers the rates and every property type. This page covers only the CEMA mechanism for getting around it. Our mortgages and financing hub covers the rest of what shapes a NYC closing cost sheet.
CEMA requirements, and why it isn’t automatic
Every lender in the chain has to say yes, on the same day, basically. That’s the practical hurdle more than the legal one. A CEMA needs:
- Real property. A house or an individual condo unit. Co-ops are personal property and were never charged mortgage recording tax, so there’s nothing to consolidate.
- Lender cooperation. Both the old and new lender must approve the assignment. If either refuses, the CEMA doesn’t happen.
- Seller consent, on a purchase CEMA. The seller has to agree to have their loan assigned rather than paid off, which adds a moving part to the deal.
- A large enough gap to be worth it. Below roughly $250,000 in consolidated balance, the legal and lender fees can eat most of the saving.
How much does a CEMA cost, and when it’s worth it
A few thousand dollars to save a five-figure tax bill, when the numbers line up. Expect roughly $2,000 to $3,000 in lender and attorney fees for the CEMA itself, on top of normal closing costs.
Here’s what that looks like on a $1,000,000 purchase. An $800,000 new mortgage against a seller’s existing $600,000 balance avoids about $11,550 in mortgage recording tax. Net of the $2,500 to $3,000 CEMA cost, that’s roughly $8,550 to $9,050 saved. Purchase CEMAs also show up most often when buying from a developer who already paid mortgage tax on the construction loan.
A CEMA can add two to four weeks to a closing, more if two different lenders are involved and the CEMA wasn’t raised early. Our assumable mortgage guide covers a related but different way a buyer can step into a seller’s existing loan.
Why co-ops sit this one out entirely
You cannot consolidate a tax that was never charged. Co-op purchases use a share loan against personal property, not a mortgage against real property, so no mortgage recording tax applies in the first place. A CEMA has nothing to save on a co-op deal.
What we tell clients about timing a CEMA
Raise it with the offer, not the week before closing. A purchase CEMA only works if it’s part of the deal from the start, since the seller has to agree and both lenders need lead time to coordinate the assignment.
We flag it early whenever a seller’s existing balance looks large enough to matter. Then we run the real numbers, tax saved against CEMA cost, before recommending it. As Georges puts it, “it’s all about the numbers and the execution,” and a CEMA is pure execution: it saves nothing if nobody raises it in time.
On an average purchase our commission rebate returns roughly $22,000 at closing, on top of whatever a CEMA saves. Our closing costs hub covers every other line item on the sheet.
Common questions
What does CEMA stand for? Consolidation, Extension and Modification Agreement. It merges an old mortgage with a new one so New York’s mortgage recording tax applies only to the increase, not the full new amount.
Can I use a CEMA when buying a home? Yes, called a purchase CEMA. The seller’s lender assigns the existing mortgage to your new lender, and you pay tax only on the gap between the old balance and your new loan.
Does a CEMA work on a co-op? No. Co-ops aren’t real property and never pay mortgage recording tax, so there’s no tax for a CEMA to reduce.
How much does a CEMA cost? Roughly $2,000 to $3,000 in lender and attorney fees, against tax savings that can run from a few thousand dollars to well over $10,000 on a large loan.
Does a CEMA slow down closing? It can, typically two to four weeks, especially with two different lenders involved. Raising it early in the deal keeps the delay shorter.
Nicole Fishman Benoliel co-founded NestApple in 2017. She's a lawyer admitted to the New York bar - her law degree is from La Escuela Libre de Derecho in Costa Rica, with further study at IE Business School in Madrid and an LLM from Fordham in New York. She does not act in a legal capacity at NestApple; every client is referred to an attorney who handles real estate deals full time.
