If you’re like most people, including most real estate agents, you’ve probably never heard of a CEMA. It’s one of those fun technical terms you would expect to read about in a text book and have very little real world effect. A CEMA is Consolidation, Extension, and Modification Agreement. This agreement serves to modify the terms of a mortgage recorded against a property and under certain circumstances merges it with another mortgage recorded against the same property (consolidation) to form one loan. Although this process is typically used by people refinancing their mortgage it can also benefit a purchaser. It is important to note that this is only available in New York, and only applies to houses and condominiums. Why? Co-ops are considered personal property, not real property.

The process works by combining the unpaid principal balance of a mortgage by assignment to a new mortgage representing any additional funds needed. The total forms a new consolidated mortgage. How does this benefit a buyer you ask? Great question! By utilizing this process a buyer is able to save the mortgage recording tax on the amount being assigned. That tax is 1.925% of the loan amount. That’s almost $10k on a $500,000 loan!

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There are of course fees involved with the process so you do need to calculate what your costs vs savings will be before moving forward. Some other things to note are that banks are not required to assign their mortgages so a CEMA may not necessarily be a possibility. For more information please contact your loan officer.



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