What Is a CEMA Mortgage?

What Is a CEMA Mortgage?
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Refinancing a mortgage or buying a home in New York triggers a transfer tax. New York homeowners can reduce their transfer tax liability with a Consolidation, Extension and Modification Agreement, or CEMA. If allowed by mortgage lenders, the agreement consolidates the old mortgage debt and the new debt so you only pay taxes on the difference between the two loan amounts. Before obtaining a CEMA, weigh the mortgage tax savings against the cost to process the agreement.


  • A CEMA ( Consolidation, Extension and Modification Agreement) mortgage allows you to consolidate old and new mortgage debt to minimize your taxes.

When to Use CEMA

When you enter a CEMA with a lender, you agree to combine old and new mortgages so you don’t have to pay the state transfer tax on the full, and usually, larger, mortgage balance. CEMAs typically apply to refinance transactions, however, you can use them when purchasing a home under certain circumstances. This type of agreement is known as a Purchase CEMA.

Associated Tax Savings

You pay the state transfer tax upon purchase of a New York home. Without a CEMA, you pay taxes again on the entire refinance amount on the same property. With a CEMA, you're only taxed on the difference between the unpaid loan amount and the new loan amount. For example, if the unpaid mortgage balance at the time of refinance is $400,000 and the refinance loan amount is $450,000, you only pay the transfer tax on the difference between the two -- the mortgage amount added to the home -- which is $50,000.

How CEMA is Processed

All borrowers in the refinance transaction, and old and new mortgage lenders must sign off on the CEMA. If refinancing with a new mortgage lender, rather then refinancing with the same company that held your mortgage, the original lender must consent to the CEMA. If you’re buying a property that currently has a mortgage on it, the seller’s lender must agree to the CEMA. No legal obligation exists for any of the parties to agree, therefore, a CEMA is negotiable.

Cost of Processing CEMA

Lenders save on transfer taxes when they agree to a CEMA, however, they still impose administrative costs for processing the agreements. For example, lenders charge assignment fees to release a seller's mortgage to a new lender in a Purchase CEMA. Both the old and new lenders charge document preparation fees. Since the transaction is technical, homeowners often pay attorneys to handle CEMAs. Because the costs to acquire a CEMA can add up significantly and surpass the tax savings, carefully consider the costs before obtaining a CEMA.