What Does CEMA Mean? How To Save Thousands In Closing Costs

If you’re thinking about purchasing in NYC, you’ve likely heard about the excessive costs due at closing. This article discusses one strategy - a Consolidation, Extension, and Modification Agreement (CEMA) - savvy homebuyers can employ to potentially save thousands of dollars when purchasing a home. Whether you’re an experienced homeowner or a first-time buyer learning the ropes, understanding this type of loan can give you a huge financial advantage. Let’s dive in!

What does cema mean?

It stands for Consolidation, Extension and Modification Agreement. They can be issued to change the duration of loan payments, the interest rates or the amount borrowed on a New York State loan.

How it Helps Homebuyers Save Big

In NYC, the mortgage recording tax can be 1.8% to 1.925% of your loan amount. When you’re talking about a six or seven-figure mortgage, that’s serious money. CEMAs can be used in home purchases to avoid paying the mortgage recording tax multiple times. As long as the existing and the new lender allow it, home buyers can consolidate the existing mortgage of the seller into a new loan. Then they only pay mortgage recording tax on the difference between the existing loan principle amount and the total amount borrowed.

Let’s Look at an Example

Say you are looking at a $1,600,000 home and you’d like to put down 20%. Your loan balance in this case would be $1,280,000 which would come with a hefty mortgage recording tax of $24,640! However, let’s say the existing owners still owe $1,000,000 on the property themselves.

With a Consolidation Extension Modification Agreement, you pay mortgage tax only on the new money—the $280,000 difference. That’s just $5,040 in taxes instead of $24,640. If the savings is split between seller and buyer, the new homeowners will reduce their tax burden by $7,280. In a buyers market, they could ask to keep the whole windfall, saving a total of $19,600.

When Does a CEMA Make Sense?

Here’s when it makes the most sense:

✅ You’re Refinancing – If you’ve already paid the mortgage tax on your existing loan, this agreement lets you avoid paying it again on that balance.

✅ The Home You’re Purchasing Carries a Significant Outstanding Balance – If the to be purchased home carries a significant loan balance, this agreement could be good news for both the buyer and the seller.

✅ You will save more than $3,000 dollars - There are origination and legal fees associated with these agreements, so you’ll need to save more than that to make it worthwhile.

🚫 Not for Co-Ops – If you own a co-op, there’s no reason to use this agreement - New York doesn’t charge mortgage recording tax on co-op loans.

🚫 Not for Home Equity Loans or Second Mortgages – These agreements only apply to first mortgages.

What’s the Catch?

While the savings can be huge, there are a few things to keep in mind:

💰 Lender Fees – Your current lender may charge an assignment fee, which can range from $500 to $3,000. If you switch lenders, expect additional legal fees.

📜 Extra Paperwork – Your lender, their attorney, and possibly your own attorney will be involved in the process, so it’s not as fast and simple as a traditional refinance.

📜 Limited Accessibility– The old and new lenders both need to be OK issuing a CEMA. If you’re asking for one as a home buyer, the seller needs to be involved in the process as well.

That being said, even with these fees, the savings from avoiding mortgage recording tax can far outweigh the costs, especially on high-value mortgages.

Are these agreements good for Selling?

Yes! If you’re selling your home and your buyer is financing their purchase, they might be able to assume your mortgage through a CEMA.

In most cases, the buyer and seller will split the tax savings, making the deal more attractive for everyone. If you’re selling a high-value home in NYC, promoting this agreement could give you negotiation leverage, make your property even more appealing to buyers, and earn you some extra $ at the closing table.

How Do You Get one?

Not all lenders offer this type of agreement, so talk to your lender first to see if they participate in the program. If they don’t, switching lenders is possible, but it will increase fees and take longer.

As a real estate professional, I always recommend discussing your options upfront—whether you’re buying, selling, or refinancing. The earlier you start, the more money you can save.

Don’t make uninformed decisions - download my buyer’s guide

It’s always best to talk to an expert when you can. Regardless of what stage you’re at in your journey, my buyer’s guide is built to empower you with all the information you need to feel confident in your next home purchase.

If you’re buying a property in NYC and want to know how to maximize your savings, this document will help you navigate NYC’s complex real estate transactions with ease. The best part - it’s free! Download it today.