Understanding A Purchase CEMA – And How It May Benefit You

CEMA Understanding A Purchase CEMA and How It May Benefit You How DOES A PURCHASE CEMA WORK? 日 田田 A Purchase Consolidation Extension and Modification Agreement (CEMA) is a way for both the buyer and the seller to save some serious money during the purchase and sale of a condo. WHAT IS A CEMA? "OLD" BANK "NEW" BANK A Consolidation Extension and Modification Agreement, "CEMA" for short, is when a "new" bank agrees to accept the mortgage previously recorded by an "old" bank. In New York, the Buyer pays what's called a "mortgage tax," which is a tax imposed on recording a new mortgage. The mortgage tax runs from 0.8% in some counties to 2.55% in other counties. When a new bank agrees to do a CEMA, it agrees not to record a new mortgage and basically take the mortgage previously recorded by the old bank. This does not mean the terms of the mortgage stay the same; all it means is that there is no recording of a new mortgage. CEMA CEMA What are the When is a Can I use a CEMA Benefits of a CEMA? CEMA Used? for Purchase? Yes. In a purchase transaction, the buyer's new bank would "assume" the mortgage from Since no new mortgage is recorded, the borrower does not have to pay a mortgage tax. For a $400,000 mortgage, the savings for the borrower range from $3,200 to $10,200. Usually a CEMA is used when refinancing your home. Most banks will allow a refinance CEMA, which is the reason closing costs are much less for a refinance than a purchase. the seller's old bank. The savings are significant. WHAT ARE THE PROBLEMS WITH DOING A CEMA? There are costs involved. The cost of an additional attorney to prepare the CEMA documents, as well as the cost of recording the CEMA with the county is incurred. However the benefits usually outweigh the costs, assuming the mortgage amount is large enough. Sellers do not want to do a CEMA. However that is because their attorneys do not know that sellers ALSO benefit from a purchase CEMA. A seller in NY saves 0.04% of the mortgage amount on a purchase CEMA. However, there are NO such savings in NYC, only Long Island, Westchester and Upstate NY. www.YLEVINLAW.COM | 田田 田 田田 田 田 ---