Purchase CEMAs Help NYC Buyers Conquer Closing
When looking at closing costs in New York City, it’s easy to see that buyers take a serious hit. With fees that might add up to 6% of the purchase price, it’s not unusual to be on the hook for $60,000! As a result, buyers are looking for ways to shrink that number. To accomplish this, some opt for a Purchase CEMA.
What Is a Purchase CEMA?
They’re officially called “Purchase Consolidation Extension Modification Agreements,” but “Purchase CEMA” is much easier on the ears. A Purchase CEMA is a real estate loan that helps buyers avoid a portion of the ominous mortgage recording tax.
The mortgage recording tax is assessed on new money borrowed. In a Purchase CEMA, the seller’s existing mortgage is transferred to the buyer’s bank and appropriately amended to mesh with the buyer’s mortgage agreement. In doing this, the portion of the principal still owed by the seller is not “new money,” and the mortgage recording tax doesn’t apply.
Are you confused? Picture this:
A buyer is preparing to purchase a New York City home for $1 million, but the seller still owes $500,000 on the principal. After considering the down payment, the buyer needs a mortgage of $800,000 to complete the purchase. If the buyer gets a Purchase CEMA, they only need to pay the mortgage recording tax on $300,000, which is the “new money” borrowed.
Things To Note About Purchase CEMAs
When buyers consider the cost savings accompanying a Purchase CEMA, they can forgive most of the downsides. You still need a complete picture to make the best mortgage decision for your situation, so . are a few Purchase CEMA negatives:
- Purchase CEMAs require seller approval, and many sellers are weary of them.
- Purchase CEMAs are sometimes complicated and might add up to six weeks to the closing process.
- Only one- to three-family homes or single residential condo units qualify for Purchase CEMAs.
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Are you looking for a money-saving strategy to use at closing? Contact MortgageDepot to see if a Purchase CEMA is your answer!
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