CEMA Loan: A Great Way to Refinance in New York

Cardinal Financial June 4, 2019 | 5 min read
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New Yorkers can refinance a little more easily with a CEMA loan.

Are you a homeowner in New York looking to refinance? You’re in luck. We’ve got the inside scoop on a loan you should know about. It’s called the CEMA loan and it’s helping homeowners in New York save money on their mortgage taxes. Sound interesting? Read on.

What Is a CEMA Loan?

CEMA stands for Consolidation Extension and Modification Agreement. For homeowners in the state of New York who are looking to refinance, it’s a process that can help them save money on their mortgage taxes. Consolidation refers to the combining of two mortgages (the existing mortgage and the gap mortgage) into one lien. Extension refers to the note. Since the mortgage note probably has less than 30 years left on it, it will probably be extended to match the term of the new loan. Modification means that the terms of the old mortgage are being modified through the CEMA according to the terms of the new loan.

By now, you’ve probably got some questions. I’ll get to some of those later on, but for now let’s define “gap mortgage.” When you’re refinancing, you have the principal unpaid balance (PUB) on the existing loan and the “gap” amount, which is the difference between the PUB and the new loan amount. The PUB is secured by the existing mortgage and assigned to the new lender. The gap amount, however, is secured by the gap mortgage, which is recorded after closing. In the end, both mortgages are consolidated to form one lien through the CEMA.

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Benefits of a CEMA

So why are we talking about CEMA loans? Well, the biggest reason is the benefits. CEMA loans can help homeowners in the state of New York to avoid paying all or some of the mortgage tax on their refinance. Borrowers can save money—especially when their tax savings outweigh the cost to initiate a CEMA (more on that later).

Savings are based on the mortgage tax rate in the borrower’s county, the PUB on their existing loan, and the fees they incur in obtaining the assignment. The assignment is required and charged by the borrower’s payoff bank in order for the CEMA to take place.

CEMA loans can help homeowners in the state of New York to avoid paying all or some of the mortgage tax on their refinance.


The borrower may have to pay an upfront fee to initiate the CEMA, and it may not be refundable. This can be a drawback to borrowers, especially when you’re refinancing—and doing a CEMA—to save money. For some, it can feel like one step forward, two steps back. But, if the tax savings outweigh the cost of the upfront fee, it may still be worth it.

How It Works

When the mortgage is recorded, the mortgage tax is assessed. Majority of the time, the existing loan in a refinance transaction is paid in full. Once the old lender is paid off, they will provide a satisfaction for the mortgage, or “discharge” it. In New York, when you satisfy a loan upon payoff and record a new mortgage under a new lender, you will incur a mortgage tax on the full amount of the new mortgage.

If the old lender is willing to assign the mortgage to the new lender, the borrower doesn’t need to record a full-on new mortgage. In that case, they really only need to record a mortgage for the difference between the loan amount and the PUB. This is typically a much smaller amount, therefore, the tax is much less.

The key to the CEMA loan process is that the existing lender assigns the mortgage to the new lender instead of satisfying it. This is why CEMA loans are sometimes called “New York Assignments.”

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Calculating Savings

The money a borrower can save with a CEMA can be calculated like this: Take the PUB from the payoff loan and multiply that number by the borrower’s county tax rate. From that, subtract the bank and recording fees. It’s pretty simple! But if that sounds confusing, don’t worry. Your loan originator or financial advisor can help you do the math.

Let’s Get Started

Do you live in New York? Are you thinking about refinancing? You might save money with a CEMA loan. If you’re ready to start the process, give us a call. You’ll want to start the CEMA process early on in the refinance process—around the time your appraisal is ordered. We’re here to help you reach your financial goals! So, what are you waiting for?

If you’re interested in refinancing, did the CEMA loan pique your interest? Talk to us on social media!

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