Whether you are in the market to buy, sell or refinance property that you own, it is possible that you can save money by way of a Consolidation, Extension & Modification Agreement – commonly known as a “CEMA”. If there is an existing mortgage recorded against the property and the lenders cooperate with an assignment of mortgage, you can use a CEMA to save money on the mortgage recording tax.
Under a traditional mortgage, borrowers pay mortgage recording tax based upon the dollar amount of the new mortgage. However, a CEMA allows borrowers to only pay tax on the difference between new and existing mortgage amounts, which could lead to drastic savings for all involved in this transaction. If you are a buyer or refinancing, your savings are direct and significant. As a cooperating seller with an existing mortgage, you could require that the buyer split the tax savings with you. Furthermore, the parties may be able to reap additional savings by using continuing lien deductions that become available when transferring property with an existing mortgage.
While a CEMA does not work out in every scenario, it is a valuable savings tool that should be considered in all real estate transactions involving a mortgage, regardless of whether you are buying, selling, or refinancing an existing mortgage.