How can I reduce my closing costs when refinancing my mortgage in New York?

When buying a home in New York State and especially in New York City, mortgage tax can often be the single largest component of your closing costs. For example, the mortgage tax in New York City for a mortgage, under $500,000, on a one-family home is equal to 2.05% of the principal amount of the mortgage. In such a case the homeowner pays 1.8% (minus $30 for a one or two-family home) and the bank pays .25%.

With interest rates at historically low levels, many homeowners are refinancing their mortgages, so must they also pay mortgage tax when they refinance? Well, it depends. The mortgage tax is due when the mortgage is signed and recorded with the NYC Register, which in New York City, is the office responsible for maintaining land records. If you’re refinancing with your existing lender, your lender will not be recording a new mortgage, but just modifying your existing one, so no mortgage tax will be due.

What if you’re refinancing with a different lender? In that case you should ask your new lender to take your existing mortgage by “Assignment” from your old lender. In other words, your new lender will essentially “buy” your existing mortgage from your old lender and modify its terms. As no new mortgage is being recorded, no mortgage tax is due.

For New York counties outside of New York City, the mortgage tax is substantially less so you should weigh your potential savings from a mortgage assignment against the lender’s additional fees they charge when assigning and taking a mortgage by assignment before making a decision.

About George H. Dippel, Attorney at Law

George H. Dippel has been practicing law for over 30 years. He is a graduate of Cornell Law School and a former partner at the law firm of Rivkin Radler in their real estate/banking department. Mr. Dippel opened his own law offices in 1993 in Bayside, Queens, New York. Mr. Dippel has assisted thousands of clients throughout Queens, Brooklyn, The Bronx, Manhattan, Staten Island, Long Island and Westchester with their wills, probate, trusts, real estate and business matters. In addition to practicing law, Mr. Dippel has taught real estate courses in Long Island University’s paralegal program. He is also a licensed real estate instructor and has taught real estate licensing courses in the New York Metropolitan area. Mr. Dippel is admitted to practice in all New York State Courts and the Federal Eastern and Southern District Courts.
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