Friday, August 20, 2010
Mortgage tax on refinance, New York
Refinancing is the hot topic these days with interest rates at a record low of 4.5%. The cost benefit analysis is the lower monthly payments vs transactions costs. With transaction costs, mortgage tax is a huge component.
Owners refinancing their mortgage should take special care to avoid paying mortgage tax on the refinance. In New York, mortgage tax is typically about 1.85% of the mortgage amount. For example, on a $800,000 loan, the mortgage tax could be almost $15,000.
To avoid paying mortgage tax, get a good lawyer to do an assignment of mortgage. Essentially, this is to get the old lender to assign the old mortgage to the new lender. This is sometimes known as a MECA (modification, extension, consolidation agreement). The owner then only pays tax on the closing costs of the deal as opposed to on the whole refinanced amount. A huge huge savings.
Disclaimer: I'm just a RE broker and property investor. Not a lawyer or CPA hence am not legally qualified to provide the above advice. Always consult your attorney or CPA for such matters.