As we talked about before, a CEMA mortgage helps borrowers save a significant sum in recording tax costs. One of the primary vehicles for this is the CEMA refinance. To illustrate how a borrower would take advantage of a CEMA refinance, lets look at a hypothetical example.
Let’s say we have current mortgage holder that is able to offer CEMA products (not all lenders are accredited through the state and capable of offering CEMA mortgages). The process generally follows a work-flow, dictated by the documents required by the lender and the state.
1. The legacy mortgage must be issued by either a new lender, or the existing lender. If it is the former, the original mortgage must be assumed by the new lender which requires special documents and legal processes.
2. The final consolidated amount is calculated by looking at the unpaid portion of the principal balance on the old mortgage, and comparing it against the new loan amount.
3. The original lender signs over the original not to the new lender. This requires obvious legal documentation by both parties.
4. The CEMA form (Consolidation Extension Modification Agreement) are prepared by the new lender’s attorneys or legal department.
5. The new mortgage is issued, and recording tax costs are calculated against the gap rather than the original mortgage amount.
The CEMA refinance process can take a few weeks, depending upon the speed at which legal documentation is assembled. As the new lender typically receives its payment (in the form of fees taxes onto your mortgage), it is in their best interest to close quickly and handle the matter in an efficient and effective manner.
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