Navigating the real estate market in New York City comes with unique challenges, especially when it comes to the significant costs associated with closing on a property. Among these is the mortgage recording tax, a state-imposed fee that can substantially increase the financial burden for buyers. NYC real estate attorney Natalia Sishodia (https://sishodia.com/how-do-i-avoid-mortgage-recording-tax-in-ny/) of Sishodia PLLC is helping clients better understand and potentially reduce this cost through strategic legal guidance.
The mortgage recording tax is a key component of closing costs when financing property in New York. For residential properties with a mortgage of $500,000 or less, the tax rate is 2.05%. For amounts over $500,000, it rises to 2.175%. For commercial and larger residential properties, it jumps to 2.8%. According to NYC real estate attorney Natalia Sishodia, knowing how this tax is calculated and who pays it is vital for anyone entering the real estate market.
For NYC real estate attorney Natalia Sishodia, helping clients navigate and potentially reduce mortgage recording tax liabilities starts with identifying exceptions and alternatives. One such option is the Consolidation, Extension, and Modification Agreement, commonly known as a CEMA loan. This arrangement allows refinancing homeowners to avoid paying the full mortgage recording tax by consolidating existing and new loans. Instead of being taxed on the entire mortgage amount, buyers only pay tax on the difference between the new loan and the outstanding principal of the existing loan.
"Purchasing property in New York City can be complicated and costly. Having the assistance of an experienced NYC real estate attorney can help save costs and ensure that the entire transaction goes smoothly," said Sishodia.
While often used in refinancing, a CEMA loan can also be used during a property purchase if the buyer, seller, and their lenders all agree to the process. According to Natalia Sishodia, this kind of cooperation can result in substantial savings. The key is that instead of paying off the seller’s mortgage at closing, the buyer’s lender accepts an assignment of the seller’s mortgage and consolidates it with the buyer’s new mortgage.
NYC real estate attorney Natalia Sishodia emphasizes that CEMA loans require the cooperation of all parties involved. The seller’s lender must be willing to assign the mortgage, and the buyer’s lender must agree to the terms of the consolidation. This isn’t guaranteed, which makes legal guidance critical. If executed correctly, the buyer can reduce their mortgage recording tax, and the seller may also benefit from a lower transfer tax.
Beyond CEMA loans, Sishodia explains that buyers who choose to purchase a co-op rather than real property are exempt from the mortgage recording tax altogether. In New York, co-ops are not considered real property, which means financing them does not trigger the tax. This can be a strategic move for buyers who are open to co-op ownership and looking to reduce upfront costs.
Understanding who is responsible for paying the mortgage recording tax is also essential. Typically, it falls to the borrower, but a portion—specifically 0.25%—is paid by the lender. Natalia Sishodia cautions that any failure to pay the correct amount can lead to steep penalties, which are calculated monthly and can quickly accumulate. Working with a qualified attorney helps ensure compliance and helps avoid unexpected charges.
Natalia Sishodia has worked with many clients looking to minimize their real estate transaction costs in New York. At Sishodia PLLC, her goal is to help buyers understand the full range of options available to them. Whether it’s through utilizing a CEMA loan or selecting a property type that avoids the mortgage recording tax entirely, the firm provides clients with a clearer path forward.
For buyers looking to make the most financially sound decision, consulting with NYC real estate attorney Natalia Sishodia is a smart first step. Understanding tax implications ahead of time can prevent surprises at the closing table and help ensure a smoother transaction.
Buyers interested in exploring options to reduce mortgage recording tax are encouraged to contact Sishodia PLLC. Whether purchasing, refinancing, or selling property in New York City, Natalia Sishodia offers guidance tailored to each client’s unique situation.
About Sishodia PLLC:
Sishodia PLLC is a New York City-based real estate law firm serving clients in residential and commercial real estate transactions. Led by NYC real estate attorney Natalia Sishodia, the firm focuses on helping clients navigate the complexities of New York real estate law with clarity and confidence.
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