If you’re buying or refinancing property in New York, you’ve probably heard the term CEMA loan tossed around. And if you’re wondering whether you should use an Assignment CEMA or a Refinance CEMA, you’re not alone. In this comprehensive guide, we’ll break down the difference between the two, explain how each works, and—most importantly—show you how these loan structures can save you thousands on mortgage recording taxes.
TL;DR – Assignment CEMA vs. Refinance CEMA
Assignment CEMA is used when refinancing with a new lender; your original loan is transferred to the new lender to avoid double taxation. Refinance CEMA is used when modifying your current loan—only new money is taxed. Both are available only in New York State and help reduce mortgage recording tax, which can be as high as 1.8% of your loan amount.
What Is a CEMA Loan?
A CEMA loan stands for Consolidation, Extension, and Modification Agreement. It’s a legal and financial strategy that allows borrowers to reduce their mortgage recording tax liability by avoiding unnecessary duplication of taxes when a mortgage is refinanced or modified.
Why does this matter?
In New York, mortgage recording tax (MRT) is charged when a new mortgage is recorded. The rate varies:
- NYC: 1.8% on loans under $500,000; 1.925% on loans over $500,000
- Outside NYC: typically around 1.05%–1.25%
For a $700,000 loan in NYC, this means almost $13,475 in recording taxes—unless you qualify for a CEMA transaction.
Why Use a CEMA Loan?
The CEMA loan is most beneficial when:
- You are refinancing an existing mortgage in New York.
- You want to reduce your closing costs.
- You are taking on a larger mortgage and want to pay tax only on the “new” portion.
By utilizing CEMA, you’re only taxed on the new money being borrowed rather than the entire loan amount.
Assignment CEMA vs. Refinance CEMA: Breaking It Down
Now that we’ve covered the basics, let’s dive into the differences between Assignment CEMA and Refinance CEMA.
Assignment CEMA
Definition: A mortgage transfer that occurs when you refinance your loan with a new lender, who assumes (or “takes assignment of”) your existing mortgage from the previous lender.
How it works:
- The current lender assigns the mortgage to the new lender.
- The new lender consolidates the assigned loan with any new loan amount using a CEMA agreement.
- Mortgage recording tax is paid only on the new money, not the total loan.
Ideal for: Refinancers who are switching banks or lenders but want to keep costs low.
Benefits:
- Major tax savings (on the balance of the existing loan).
- Often used in rate-and-term refinances with minimal cash-out.
Refinance CEMA
Definition: A method where your existing mortgage is combined with new borrowed funds via a single lender under a new agreement, typically used for loan modifications or cash-out refinances.
How it works:
- The lender modifies and consolidates the current loan with the new funds.
- Recording tax applies only to the difference (the new money).
Ideal for: Homeowners looking to stay with their current lender but change the loan structure.
Benefits:
- Partial tax savings on the additional amount.
- Best for cash-out refinances or loan restructuring.
Comparison Table: Assignment CEMA vs. Refinance CEMA
| Feature | Assignment CEMA | Refinance CEMA |
| Lender Type | New lender involved | Same lender |
| Tax Paid On | Only on new loan portion | Only on additional funds |
| Ideal For | Straightforward refinance with minimal changes | Loan modifications or cash-out refinancing |
| Time to Close | Can take 45–60 days | Typically faster (30–45 days) |
| Legal Complexity | Higher (needs cooperation between two lenders) | Moderate |
| Potential Savings | Highest (tax exempt on majority of loan) | Moderate to high, depending on cash-out amount |
| Common Use Case | Rate-and-term refinance | Cash-out refinance |
Real-World Example
Let’s say you have a $600,000 mortgage and want to refinance with a new loan of $650,000.
Without CEMA:
- You’d pay tax on the entire $650,000.
- At NYC’s rate of 1.925%, that’s $12,512.50 in MRT.
With Assignment CEMA:
- Tax is paid only on the $50,000 new money.
- MRT: $962.50.
- Total savings: $11,550.
This is why CEMA transactions are so valuable in New York.
Step-by-Step: How to Get a CEMA Loan
If you’re considering either Assignment or Refinance CEMA, follow these steps:
Step 1: Find a CEMA-Friendly Lender
Not all banks or mortgage brokers offer CEMA loans. Confirm availability early.
Step 2: Request the Assignment
If doing an Assignment CEMA, your new lender must request the assignment from your current lender.
Step 3: Prepare for Processing Delays
CEMA deals take longer—typically 4–8 weeks depending on lender cooperation and legal review.
Step 4: Review Fees
Some lenders charge CEMA processing fees ($500–$1,000). Make sure the tax savings outweigh the cost.
Step 5: Sign the CEMA Agreement
You’ll sign a Consolidation, Extension, and Modification Agreement that details the loan structure and tax basis.
Step 6: Close and Save
Once closed, enjoy the reduced closing costs—especially that lower mortgage tax bill!
FAQs
What is a CEMA mortgage used for?
CEMA loans help reduce mortgage recording taxes during refinances or loan modifications in New York.
Can you use a CEMA loan on a purchase?
Only in certain Assignment CEMA for purchase cases, when a buyer takes over the seller’s loan. These are less common and more complex.
How much can I save with a CEMA?
Anywhere from $2,000 to over $20,000, depending on the loan size and mortgage tax rate in your county.
Do all lenders offer Assignment or Refinance CEMA?
No. Always ask lenders about their CEMA capabilities before applying.
Is CEMA available outside New York?
No. CEMA is specific to New York State because of its unique mortgage tax structure.
Conclusion: Which One Should You Choose?
If you’re refinancing and want to switch lenders, go with Assignment CEMA.
If you’re staying with your lender but changing loan terms or cashing out, Refinance CEMA is your path.
Both options offer powerful ways to cut costs—but timing, lender policies, and loan type will determine which one works best for you.
