What is Purchase CEMA? Or Purchase Consolidation Extension and Modification Agreement

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When you are selling or purchasing a home in New York City, it is important to try and save money in any way possible. As prices creep up year by year, so do the mortgages and taxes on these transactions. We have two special guests today to help you better understand Purchase CEMA also known as Purchase Consolidation Extension and Modification Agreement.

It works like this: if the seller is still paying off her mortgage, and the buyer needs to get a mortgage as well, the buyer can take on the seller's loan, potentially saving both sides thousands of dollars in transaction taxes. It can also be a smart card to play in negotiations—a way for the parties to cut costs without the seller lowering the price.

So how exactly do you save money?

Buyers have to pay a state tax on the full dollar figure of any mortgage, known as a mortgage recording tax. With a CEMA, however, a buyer is only required to pay the tax on the so-called "new money," the funds that they borrow from the bank, and not the portion that they take on from the seller. 

For instance, if you're buying a $1 million dollar property and taking out an $800,000 mortgage, you'd be taxed on the full amount of the loan at a rate of 1.925 percent, totaling $15,400. If the seller assigns you their $300,000 mortgage, you'd only pay taxes on the remainder of your financing—$500,000—reducing your bill to $9,625, a savings of nearly $6,000.

Lets listen to the interview I recorded with Shawn Carson and Jeffrey St. Arromand

If you have any more questions about the topic please comment or reach out to me to discuss! I would love to hear from you. Follow Jeff and Shawn on Instagram if you want to reach out. @jeffrey_starromand_realestate @nycmortgagebroker @marcusamadeus