CEMA stands for a Consolidation Extensions and Modification agreement. They are used primarily in New York as a tool to save money on mortgage tax recording costs. With houses in New York, particularly in the lower portion of the state at an all-time high, these savings can be in the tens of thousands. Its important to understand that this is a tool used mainly by professional real estate brokers. It is usually advisable that you talk to a professional when applying for a CEMA mortgage in the state of New York.
A CEMA mortgage works by taking the old mortgage (the existing mortgage sometimes called the old money, and using it towards the calculation of the total loan amount and the difference between the two (the new money). So for a total loan amount of $100,000, and an existing mortgage you $80,000, the new money would be $20,000. The recording tax costs are then calculated against $20,000, rather than the $100,000 total loan amount. You can see that this would result in significant cost savings for the borrower.
When considering whether a NY CEMA is right for you, its important to weight the costs of the process (legal doc fees, lender fees, etc) against the savings associated with the CEMA mortgage. If your savings outweigh your costs, its a no brainer. You might consider a CEMA Refinance, which has its own procedures and documentation.
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