How to Save Money on Closing Costs with a Purchase CEMA
Buying a home in New York City is an exciting milestone, but it also comes with a long list of expenses such as attorney fees, title insurance, and taxes. One of the largest hidden costs buyers face is the Mortgage Recording Tax (MRT). Luckily, there is a smart strategy that can help you save thousands of dollars called the Purchase CEMA.
What Is a Purchase CEMA?
A Purchase CEMA (Consolidation, Extension, and Modification Agreement) is a special agreement between the buyer, seller, and lender. Instead of paying the Mortgage Recording Tax on the full amount of your new mortgage, you only pay tax on the difference between the seller’s outstanding loan balance and your new mortgage.
This arrangement allows you to avoid paying tax twice on money that was already taxed when the seller first obtained their loan.
Why It Matters for NYC Buyers
The Mortgage Recording Tax in NYC is almost two percent of your loan amount. On large mortgages, which are common in Manhattan and Brooklyn, that can add up to tens of thousands of dollars in closing costs.
Using a Purchase CEMA helps buyers reduce their closing costs significantly and free up funds for renovations, moving, or savings.
Real Example of CEMA Savings
Here is how it works in practice:
Purchase price: $3,000,000
Buyer’s mortgage: $2,000,000
Seller’s remaining mortgage: $1,200,000
Without a Purchase CEMA:
The Mortgage Recording Tax applies to the full $2,000,000 mortgage.
Tax owed: approximately $38,500
With a Purchase CEMA:
The Mortgage Recording Tax only applies to the difference of $800,000.
Tax owed: approximately $15,400
Total savings: more than $23,000 at closing.
The Bottom Line
If you are buying in Manhattan, Brooklyn, or other parts of New York City, a Purchase CEMA could make a major difference in your closing costs. Not all transactions qualify, so it is important to work with the right real estate broker, lender, and attorney who are experienced with the process.
As your real estate advisor, I make sure my clients know about opportunities like the Purchase CEMA so they can maximize savings and feel confident throughout the buying process.