HOMEOWNERS looking to refinance their mortgage will need to compare interest rates, terms and fees on the loan, but some who live in New York City may also want to arrange what is called a mortgage assignment, when the loan balance is low. transferred to the new lender. of the old.
Not all lenders allow such transfers, but if both do, borrowers can avoid paying a second portion of mortgage registration taxes (they paid the first round when they bought the home).
New York State imposes a mortgage registration tax of 0.5% of the loan, and with other special taxes added, New York City residents pay a total of 1.8% on lower loans at $ 500,000, state tax included, and 1.925% for those of an amount equal to or greater than this sum. Among the various counties, the total mortgage taxes in Westchester and Rockland are 1.3 percent, while in Nassau, Suffolk, Dutchess, Orange and Putnam it is 1.05 percent.
There is no mortgage registration tax in New Jersey or Connecticut, according to Michael Moskowitz, president of Equity Now, a direct mortgage lender. Co-op owners are also exempt from paying because they own shares in a building rather than real estate, said Lawrence F. DiGiovanna, a real estate lawyer in Brooklyn.
But for those affected by this tax, it can certainly add up to the closure. On a refinanced loan of $ 450,000, a borrower living in New York can expect to pay an additional $ 8,100.
Instead of issuing and recording a new loan when a borrower refinances, the assignment process transfers a mortgage to a new lender, who then reviews it. Lenders sometimes call the process “Consolidation, Extension or Modification Agreement” or “Modification, Extension or Consolidation Agreement”.
It’s important to learn about a mortgage transfer early on in the refinancing process, mortgage experts say, because locating and transferring all the necessary paperwork can be time consuming. If the mortgage has been sold or turned over to a service company, the owner must have that company sign.
Once borrowers have determined that their new and old lenders will work with them on the loan assignment, they need to “understand what the potential savings are and compare it to the overall cost of this transaction,” said Marc Kunen, director of the loan assignment. Manhattan branch for mortgages. Master, mortgage banker.
Yes, there is a cost. Borrowers still have to pay an assignment fee. Each bank typically charges several hundred dollars to $ 1,500, or more, according to Equity Now, which maintains an assignment fee database in the New York City area.
If you’re refinancing a low loan balance, say $ 100,000 or less, it may not be worth giving in, Moskowitz said, adding that paying the tax may be easier and cost the same or less than the fees. .
Borrowers should also keep in mind that only the balance of the old loan is exempt from mortgage tax. Anything added to the loan amount – perhaps to pay for home renovations or consolidate debt – would be taxed.
Although most banks have procedures for assignments, there are sometimes issues that can add days or weeks to the process. “Don’t lock in your rate until you understand what the time parameters should be,” Mr. DiGiovanna said.
He also suggests that borrowers review the letter of commitment from the new lender, so that they understand the conditions for refinancing.
Sometimes banks will not be able to locate an original loan and related documents. If the original lender is still in business, those documents can be recreated, said Stephen Chiaino, a partner in Mr DiGiovanna’s law firm. The new lender is unlikely to accept documents from the owner unless they are certified true copies, he added.