New York State is one of the only states to impose a mortgage tax. It requires that a tax be
paid on any new mortgage that is recorded within the state's boundaries. As a general rule, New York State mortgage tax within the 5 boroughs of New York City range between 1.8% and 2.8% depending on the type of
property mortgaged.
New York tax law permits a mortgagor to avoid a second payment of mortgage tax through an assign-
ment of an existing mortgage. This law is typically used in refinance transactions where a homeowner is
taking out a new mortgage. In order to assign the mortgage tax a homeowner must obtain a consolida-
tion, extension and modification of the original mortgage. A consolidation, extension and modification is
achieved by contacting the existing lender and "exchanging" the original note and mortgage for the new
note and mortgage. As long as both the existing lender and the new lender agree to the assignment, the
homeowner can avoid the second payment of mortgage tax. The homeowner is, however, responsible to
pay mortgage tax on any amount above the existing lien on the property or the "new money". This proce-
dure is widely accepted by lenders.
Benefit to the Purchaser
The mortgage tax avoidance through an assignment also applies to purchase transactions. A purchaser
can avoid the payment of New York State mortgage tax by having the seller assign their existing lien to
the new lender. It is not widely practiced and it requires far more comprehensive research, a lot more
work and enough experience in the facilitation of an assignment, but it can and is done.
The same "conditions" apply, they're just a little different. The seller must allow a purchaser to receive this
benefit. The seller must authorize their lender to assign the existing lien to the new lender. The existing
lender must allow for their loans to be assigned and the new lender must be willing to accept an assigned
lien. It is a bit more work, but the benefits for everyone in the transaction are tremendous. The purchaser
will pay New York State Mortgage tax on any "new" money that they are mortgaging. "New money" will
be the difference between the existing assigned lien and the new mortgage.
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