What is a CEMA loan, and how can it reduce my mortgage recording tax?

New Yorkers have access to a little-known mortgage strategy that can save thousands of dollars. A consolidation, extension, and modification agreement—known as a CEMA—is most commonly used by homeowners refinancing their mortgages, though in some cases, buyers can use it too.

The appeal is straightforward: A CEMA can dramatically reduce what you owe in mortgage recording tax. Rather than paying tax on the full amount of a new loan, the process assigns an existing mortgage from one lender to another, so you're only taxed on the unpaid principal. The savings can be considerable.

"If you pay off one mortgage and take out another, you have to pay the tax on the face amount of each mortgage. When refinancing with a CEMA loan, you take the existing mortgage, consolidate it with the new one, and pay the tax on the gap between the two," said Miguel Lopez, an attorney who works with National Cooperative Bank.

[Editor's note: A previous version of this post was published in March 2025. We are presenting it again with updated information for June 2026.]

For example, if you have a principal balance of $100,000 on your mortgage and then refinance with a new lender for a mortgage of $200,000, you will only have to pay a mortgage recording tax on the $100,000 difference rather than the full $200,000. 

This loan type is unavailable to co-op buyers because the mortgage recording tax is paid only on real property, such as a condo or townhouse, whereas in a co-op, you are buying shares in a building.

In NYC, the mortgage recording tax rate is 1.8 percent for mortgages under $500,000 and 1.925 percent for those over $500,000. So with a CEMA, in the example above, you would pay $1,800 instead of $3,600.

"We do it every time we can," said Melissa Cohn, regional vice president at William Raveis Mortgage. "The mortgage recording tax in New York is expensive, and you want to do everything you can to avoid paying it again."

Potential costs of CEMA loans

A CEMA loan does have its own expenses. If you refinance with your current lender, the process is easier because there's no need to obtain approval to reassign the loan. However, if you switch banks, your original lender must approve the assignment of your mortgage to the new one, which can trigger fees. You'll need to decide whether it's worth the additional expense.

According to Cohn, banks may charge anywhere from $500 to $1,000, or a percentage of the loan amount.

"It's at the discretion of the bank, so the CEMA makes sense when the cost of doing it is significantly less than the cost of paying the mortgage recording tax," she said. 

There may be other complications if you're refinancing from one bank to another. Some lenders will not provide CEMA loans when refinancing with an outside bank, Cohn added. CEMAs can also take time to be approved—from four to eight weeks. Another potential issue might arise if the chain of title is incomplete.

"You can't ensure that the bank that holds the mortgage has retained all the copies and proper forms," she said. "Far too often, we don't get them—documents get lost, and without a complete, unbroken chain, you can't do a CEMA."

A purchase or 'splitter' CEMA

The other type of CEMA—called a purchase CEMA, or "splitter"—involves consolidating two or more loans into a single loan as part of a sale. A seller who is still paying off the mortgage can transfer it to a buyer who needs financing. In a situation like this, the buyer will only have to pay the mortgage recording tax on the new mortgage amount, minus the seller's remaining loan balance. In turn, the seller saves on transfer taxes, paying only on the sales price of the home minus the remaining mortgage debt transferred to the buyer.

Keep in mind that a purchase CEMA, or mortgage assignment, is different from a mortgage assumption. An assignment allows you to take on someone else's mortgage and negotiate your own rate and terms, versus a mortgage assumption, where you take on a mortgage exactly as it was for the original borrower, with the same rate and terms. 

Still, CEMA loans aren't common for buyers.

"The purchaser takes on the seller's current obligation, but the seller is technically still liable on that note," Lopez said. "At some point, a bank technically could come and collect on that note. It's very rare that two banks agree to do a purchase CEMA."

Purchase CEMAs may become more common in the future if interest rates start to climb, according to Lopez. "If we get to a point where there is a 12 percent rate on mortgages, and sellers have a 3.75 percent rate, we could see an uprise as the savings outweigh the potential risk," he said.

—Earlier versions of this article contained reporting and writing by Alanna Schubach.

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