Overview Of New York Taxes
Property taxes in New York vary greatly between New York City and the rest of the state. In New York City, property tax rates are actually quite low. The average effective property tax rate in the Big Apple is just 0.88%, while the statewide average rate is 1.69%.
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The Seller Must Agree To A Purchase Cema
Of course, for this to happen the seller needs to provide consent. This price of this consent may be heavy, as a savvy seller may ask you to split the cost savings with them.
However, you can make sure the seller knows that they will also be saving via reduced New York State transfer taxes which are normally 0.4% of the sale price.
Note: If a purchase CEMA is conducted, the seller will only pay the NYS transfer tax on the sale price less the amount of the mortgage transferred. Please note that the NYC transfer tax is not affected whether you do a purchase CEMA or not.
Purchase CEMA loans can also be utilized for a refinancing of an existing home.
In fact, lenders will be more willing to do a purchase CEMA if they will be holding onto the mortgage. Essentially, they are usually more than happy to do a purchase CEMA and assign the new loan to themselves.
Purchase CEMA transactions are highly complex and require the negotiating skills and experience of a real estate attorney familiar with such transactions, as well as a buyers broker who has done these types of deals before.
Calculate the total buyer and seller closing cost savings from a Purchase CEMA Loan using Hauseits Interactive Purchase CEMA Savings Calculator.
How Is The Mortgage Recording Tax Filed
The New York City Register Office collects this tax for Manhattan, Brooklyn, Queens and the Bronx. The Richmond County Clerk collects this tax for Staten Island.
All property documents for Manhattan, Brooklyn, Queens and the Bronx are recorded online using ACRIS, which is NYCs online database of public property records. Documents for Staten Island must be recorded in person at the Richmond County Clerks Office.
The legal authority for collecting the NYC Mortgage Recording Tax comes from Title 11, Chapter 26, Administrative Code and Tax rates Section 253-a.
MT-15, otherwise known as the Mortgage Recording Tax Return, is a New York State Department of Finance form that needs to be properly filled out and filed for your mortgage to be recorded.
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What Can A Cema Lawyer Do To Help
When it comes to dealing with the NYS mortgage tax, a CEMA lawyer or law firm is crucial when you are refinancing your home in New York. CEMA may help save money by significantly boosting your chances of being able to pay a lower mortgage recording tax than what you normally would. If you are refinancing or even just considering it, you need to consult with an experienced CEMA attorney to discuss the benefits and drawbacks and whether or not it is in your best interest.
The Law Office of Yuriy Moshes has the experience and knowledge to provide this for you. We are in the greater New York City area including all its boroughs, including Manhattan, Brooklyn, Queens, the Bronx, and Staten Island) as well as Northern New Jersey, Long Island, and Upstate New York.
Average Closing Costs By County
Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each countys median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the countys median home value to find the closing costs as a percentage of home value figure. Sources include the U.S. Census Bureau 2018 5-Year American Community Survey, Bankrate and government websites.
One of the closing costs fees youll have to pay is a New York State mortgage recording tax. Only about seven states charge this type of tax, and New York is one of them. New York City, Yonkers and several other cities also impose a local tax on mortgages in those jurisdictions. The state tax is 50 cents per $100 of mortgage debt, plus an additional special tax of 25 cents per $100 of mortgage debt. If the property is located in a city or town that has mortgage tax, youll pay an additional 25 to 50 cents. This tax is due at closing to the recording office of the county in which the property is located.
Sellers are responsible for an additional fee called the realty transfer tax. In New York, its $1.25 for each $500. There are some counties that might charge an additional fee. And, if the home is more than $1 million, theres an additional 1% fee, sometimes referred to as a mansion tax.
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How To Calculate Your Mortgage Tax
Calculating your mortgage recording tax is relatively straightforward. Take the principal of your mortgage, which is the total amount you are borrowing from a lender, and divide it by 100. Next, round up the quotient to the nearest whole number. Take the result and multiply it by your states specific mortgage recording tax rate. Finally, check for allowances. In some states, you can deduct an allowance from the computation, so be sure to review local laws.
Visit your states Department of Taxation and Finance in order to obtain mortgage recording tax forms. Note that mortgage tax rates may vary within a states various counties and/or cities, so you should check in with your local jurisdiction.
Lets look at a $300,000 mortgage loan taken within the State of Alabama, with a 0.15% mortgage tax rate:
Pretty straightforward, huh? You cannot deduct the amount paid for your mortgage recording tax when you file with the IRS. You can, however, add this amount to the cost basis of your property. If and when you sell, you will benefit from the added value.
Details Of New York Housing Market
Many people who arent familiar with New York assume that the state is mostly comprised of cities. That viewpoint of the Empire State couldnt be further from the truth. Much of the state is rural, with over 35,000 farms covering seven million acres, as well as the Adirondack Park, which encompasses six million acres.
New York is only the 30th-largest state by size. At 47,200 square miles, its right behind North Carolinas 48,700 and above Mississippis 46,900. However, it has the fourth-largest population in the U.S., with an estimated 19.45 million residents. New York long held the third-largest population until 2014, when Florida surpassed it.
Despite those numbers, New York still contains the largest city in the U.S. by population. Almost 8.4 million people reside in New York City. After New Yorks five boroughs, most of the population is housed in the counties surrounding New York and Long Island. After that comes the western part of the state, including the cities of Buffalo, Syracuse and Rochester.
The New York housing market ranks 36th in our Healthiest Housing Markets study for 2020. The best areas for homeowners are Cheektowaga, West Seneca, Buffalo and Tonawanda, based on a number of factors. The study looked at the average number of years the homeowner lived in the home, negative equity, days on market and a few more indicators.
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Title Insurance Isn’t Free
If you have decided on buying a condo in NYC and will be taking out a mortgage, title insurance may be a closing requirement for you.
This requirement, however, will not apply to co-ops due to the individual shareholder setup.
If buying a co-op, you can simply do a search on the property to see if there are any liens or open permit issues that need to be resolved.
Some buyers finance in order to buy the property. If this is you then your lender will also need title insurance.
It is also important to keep in mind that if you refinance, you will need to buy title insurance again as your new lender will need the same sense of security.
The cost of title insurance depends on the provider, but an approximate cost is 0.45% of the purchase price.
Title insurance covers the buyer if they suddenly find out after closing the deal that there are outstanding liens or any other legal issues from former owners or open/unpaid permits.
Should any issues or liens be discovered after the closing, the title insurance company will take on the financial burden as well as the responsibility of solving these discrepancies.
Savings To Seller When Purchasers Use A Cema
Implementing CEMA can also help sellers. According to the New York State Law on Continuing Lien Exclusion , the outstanding amount of a mortgage existing prior to a transfer may be excluded from the purchase price when the property being transferred is a one-to-three family house or condominium unit. In other words, the seller benefits by saving a portion of their New York State transfer tax as well. Rather than the Seller paying transfer tax on the full sale price the transfer tax is the sale price less the amount of the mortgage obtained by Buyer. The New York State transfer tax rate is currently 0.4% of the sales price of a home.
Additional fees Associated with a CEMA
There is a flip side to arranging for the savings on mortgage recording tax. There are additional fees that will be imposed to complete the consolidation transaction:
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Can You Avoid These Costs
Yes! By working with a direct cash home buyer who will pick up all costs associated with the closing! A direct cash home buyer like our company will not charge you a real estate listing commission as they are not a real estate agent selling your home, but rather a buyer of your home. Our company, Comax Properties will also paying the sellers portion of the closing costs. This will save you money and hassle at the closing table.
Are Repairs Included?
This is another one that is negotiated between the buyer and the seller. If the home is in need of some obvious repairs, the seller will often take care of these before putting their home on the market. However, if an inspection shows additional repairs are needed, a buyer may make his offer contingent on repairs being made. A buyer and seller can work this out before going to closing.
Not All Closing Costs Are Negotiable
Unlike other closing costs in NYC such as transfer taxes in a sponsor unit sale or the Mansion Tax which may be negotiable, it is very uncommon to see the Mortgage Recording Tax being paid by anyone but the buyer.
Thats because the amount of the tax will depend entirely on the buyers finances and decision on how much to borrow.
If the buyer purchased the apartment all cash, there wouldnt be any Mortgage Recording Tax to speak of.
As a result, it doesnt really make sense to ask the seller to cover the Mortgage Recording Tax since the amount of the tax is entirely dependent on the financing decisions of the buyer.
Pro Tip: A sponsor can apply for a rebate of the Mortgage Recording Tax they originally paid to purchase the lot. For example, say a buyer of a new construction unit pays $10,000 in Mortgage Recording Tax. The sponsor can fill out a two page affidavit so that $8,000 of that for example will be credited to them at closing. The other $2,000 in this example would still go to the government via the title company. Theres no difference for the buyer, but its good to keep this in mind as a negotiating point if your lawyer finds out that the sponsor is getting this windfall.
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How Much Is The Mortgage Recording Tax In Nyc
The Mortgage Recording Tax in NYC varies depending on the size and classification of the mortgage, and is composed of both a New York City tax as well as New York States Basic Tax, Special Additional Tax and Additional Tax. The rates are as follows:
All mortgages with initial loan balances less than $500,000
2.05% of the initial mortgage principal
Mortgages of one to three family houses and individual residential condo units with initial loan balances of $500,000 or more
2.175% of the initial mortgage principal
All other mortgages with initial loan balances of $500,000 or more
2.8% of the initial mortgage principal
Note: If youre buying a condo or a co-op, youre in luck because youll get a generous $30 off of your Mortgage Recording Tax bill from the rates above.
The Mortgage Recording Tax is not unique to NYC however, the Mortgage Recording Tax in NYC is dramatically higher than the tax rates in other counties in New York. For example, the total Mortgage Recording Tax in Westchester County, NY is only 1.3%.
The Mortgage Recording Tax in other New York counties are typically 1% or 1.25%, though you will see a few counties such as Ulster and Madison charge as low as 0.75%. Check out the tax tables yourself on Form MT-15, otherwise known as the Mortgage Recording Tax Return.
How Much Is The Ny Transfer Tax
Whenever there is an exchange of real estate, the state, county or municipality in which the real estate is located charges a transfer tax on the privilege of transferring real property within the jurisdiction. What this basically means is that in exchange for making the process legal and official, a fee is paid to those providing the jurisdiction. Another example of this type of tax is the fee for registering a motor vehicle.
In New York State, the transfer tax is calculated at a rate of two dollars for every $500. For instance, the real estate transfer tax would come to $1,200 for a $300,000 home. New York State also has a mansion tax. Properties with sales prices of $1 million or more are subject to an additional real estate transfer tax of 1%. That means a home that sells for $1 million is has a transfer tax of 1.4%.
In New York, the seller of the property is typically the individual responsible for paying the real estate transfer tax. However, if the seller doesnt pay or is exempt from the tax, the buyer must pay. The buyer is usually responsible for the 1% additional real estate transfer tax on properties worth $1 million or more. That said, if the buyer is exempt, the seller must pay. Whatever the situation whether the buyer or seller pays New York requires the full tax amount be paid.
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Average Closing Costs In New York
Across the state, the average home sale price is between $400,000 and $500,000. If you buy a home in that price range, the average closing costs before taxes are $5,571.32. These fees pay for processing, appraisal and recording fees, plus title insurance, municipal searches and more.
New York is also notorious for its taxes, and real estate is no exception. If you live in the city, you face property taxes and the New York City mortgage tax which can be anywhere from 1.80% to 2.80% of your purchase price resulting in about $13,261.67 in closing costs after taxes.
New York Citys Mansion Tax
If youre buying a home for $1 million or more in the Big Apple, your purchase is subject to the New York City mansion tax. Its a mere 1% of your purchase price, but it ends up being no small tax. And youll end up paying it within 15 days of your closing.
Sellers dont get away scot-free, either. If youre the home seller, you pay fees as well as a New York State or New York City transfer tax.
- Miscellaneous co-op fees: Varies
Remember To Factor In Building Fees
Most condo and co-op buildings charge fees for moving in and moving out , as well as a managing agent and co-op attorney fee, and board application fees .
If purchasing a new condo, you may be responsible for helping to pay for the supers apartment and possibly for part of the buildings insurance costs for the initial year.
Once you apply for the purchase, you should receive a list from the board of what is needed, as well as any associated fees. If you have not received it, be sure to inquire as this can be very helpful to the buyer.
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You Might Need To Pay A Mansion Tax
This mansion tax is based on sales price alone, regardless of how big your actual property may be.
The tax amount differs on a scale of 1%-3.9% of properties based on what was paid for the purchase price.
The maximum percentage of 3.9% is for properties that sold at $25,000,000 or more.
If you happen to have your eyes set on an apartment just over the $1,000,000 threshold, you are able to meet the limit with a commission rebate, since it is treated as a reduction to the sales price,