CEMA (Consolidation Extension and Modification Agreement) refers to an agreement between an existing lender and a new lender to consolidate two or more mortgages into one new loan in the state of New York. The purpose of using a CEMA is to avoid paying the NY mortgage recording tax of 0.5% that had been previously paid on existing mortgages included in the new CEMA loan. The 0.5% tax would need to be paid on new mortgages included in the CEMA loan consolidation.
For example, if the CEMA included $1 million of new money, the borrower would save $5,000 minus fees. New York City and several counties impose additional taxes that can dramatically increase the potential savings. On a multi-million dollar Real Estate Investment Glen Cove NY, a CEMA could be well worth pursuing.
The CEMA Process
* Carefully review the terms of the commitment letter for the new mortgage to determine if there is anything that would prohibit a CEMA.
* It’s often better not to lock in the rate until there is a clear understanding of how long each lender will take to do their part – this can range from days to weeks if something goes wrong.
* Find out if all of the lenders holding the existing mortgages will agree to participate in the CEMA. Not all lenders will be willing to assign the mortgage they are currently holding, especially individuals or other private lenders.
* Expect each bank to charge fees for the loan assignment, document preparation and processing and legal fees.
Too Expensive for Small Loans
The legal and other fees could easily exceed the potential savings on a small loan. Even if the CEMA would save some money, the extra time and hassle could make some borrowers decide that the savings weren’t large enough to be worthwhile. Browse here for more details.
Very Useful for Experienced Investors
CEMAs come into their own for investors making a substantial Real Estate Investment Glen Cove NY. If the savings exceed the costs, it’s an easy decision. It’s always advisable to go over the parameters thoroughly with a real estate attorney who has prior experience with CEMA financing.
At The Law Offices of Peter Morra, Attorney Morra has been providing effective and knowledgeable legal services for real estate transactions, including financing, closings, and zoning issues since 1995. Whether you’re a homeowner buying your first home or considering Real Estate Investment Glen Cove NY, contact the office today.
