What Is the Mortgage Recording Tax in NYC Real Estate?

What is the mortgage recording tax in
New York City? We will demystify this topic in the following video, my name is
Nick from Hauseit . We are the largest For Sale by Owner and buyer agent
commission rebate company based here in New York City established in 2014 so
let’s get started. The mortgage recording tax is the largest buyer closing cost in
New York City buyer closing costs for coops are approximately 2% and
they are around 4% for condominiums assuming you are financing.
The mortgage recording tax only applies to real property and therefore coops are
excluded and that’s the reason largely why co-op buyer closing costs are
approximately 2% lower than buyer closing costs for condominiums. The
mortgage recording tax itself is 1.8% for loans below $500,000 and 1.925% for loans of $500,000 or more. Keep in mind this amount is based
on the actual size of your loan as opposed to the purchase price so if
you’re buying a $1,000,000 place at 20% down your loan size is $800,000
and therefore the mortgage recording tax would be that higher rate of 1.925%
on the entire loan amount of $800,000. Technically speaking, the mortgage
recording tax is actually 2.05% and 2.175%. However, the lender customarily covers 0.25% of this
amount for residential properties and that’s the reason why the actual
mortgage recording tax rates. We mentioned are again 1.8% for
loans below $500,000 and 1.925% for loans of $500k or more. It’s
also important to point out that the mortgage recording tax has a third and
higher rate of 2.80% for other property types and this would consist of
commercial property as well as multifamily properties with 4 or more
units. In the case of other property types, the lender does not customarily
cover any of the mortgage recording tax and therefore in the row on
lender pays the amount there is 0 so the buyer would pay that full amount of
2.80% for other property types. Again, commercial and multi-family properties
with 4 or more units. Now, one pro tip you can reduce the amount of the
mortgage recording tax as a buyer under certain circumstances. Those
circumstances are as follows the property type would have to be a condo
or a house since a co-op again it doesn’t have the mortgage recording tax
in the first place. Secondly, the seller needs to have some sort of reasonably
large amount of existing loan balance. If both of these conditions are met, you can
reduce the amount of the mortgage recording tax through what’s called a
purchase CEMA. Now, we have an entire other video dedicated to this topic but
in short what this allows you to do is to actually have the existing loan that
the seller currently has be assigned to you as the purchaser and this reduces
the amount of so called new loan money that is originated and therefore it
reduces the amount of loan money that must be recorded. So you would save that
mortgage recording tax on the amount of the loan that is transferred moreover
with a purchase CEMA this seller would actually avoid paying the New York State
transfer tax on the portion of the actual loan balance which is assigned.
Now, usually the savings are of course much more biased in the favor of the
buyer because the buyer saves close to 2% when the seller is saving less than
half a percent on the transfer tax so usually it’s negotiated such that in
order to obtain the consent of the seller the buyer and the seller usually
agree to split the savings. So in short the mortgage recording tax is the
largest buyer closing costs in New York City and buyer closing costs are really
high. Now there are ways to reduce your buyer closing costs if you’re looking to
buy a place in New York City. Easiest way is through a buyer agent commission
rebate also known as a Hauseit at buyer closing credits
and you can learn more about this on our website www.hauseit.com. Final point just to
reiterate, if you’re purchasing a co-op apartment in New York City the mortgage
recording tax does not apply and that’s because ownership of a co-op is not
considered to be real property in the way that owning a condo house or a piece
of land may be as well. When you own a co-op, you are actually purchasing shares
in a private corporation that owns the building itself so you purchase shares
in that corporation and you also receive a proprietary lease which gives you the
right to occupy this specific apartment that you purchase. So ultimately condo
versus caught it’s still buying something it still costs money but it’s
technically a different form of underlying ownership structure and in
this case with the mortgage recording tax it’s highly beneficial to you if
you’re buying a co-op because you are paying lower buyer closing costs and
furthermore coops are generally 10 to 40% less expensive here in New York
City. The downside of course with a co-op is the fact that there’s a board
approval process where you could be rejected.
There’s also restrictions on subletting over time there may also be a flip tax
when you sell so seller closing costs might be higher for coops vs condos. And finally, when you are looking to sell your buyer is subject to co-op board
approval which would make for a slightly less certain outcome and exercise
compared to if you were selling a condo or house. We hope you found this video
I’m Nick at Hauseit, visit our website www.hauseit.com to learn about ways to
save money when buying selling here in New York City and if you like this video do
us a favor like and subscribe and leave us a comment and we’ll do our best to
get back to you!

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