Q: I’m trying to refinance my home and I’m concerned about closing costs. How much will it cost and is there any way to reduce the charges?
A: John Reali, a real estate attorney in Jericho, says that the buyer will have to sign a multitude of documents for the mortgage. Closing costs vary from 5- to 10 percent of the loan, and it depends on many variables, including the type of mortgage, whether the buyer has elected to get a reduced interest rate by paying "points." The buyer should contact his or her attorney in advance and the attorney should be able to give a reasonable estimate of these costs, he says.
At the closing, the bank also takes escrow from the buyer to pay future taxes and homeowners insurance. Any issue of back taxes or parking tickets or other liens owed by the seller is resolved at the closing by the seller paying these items to or depositing escrow money with the title company to pay for said items. This money normally does not go back to the buyer.
One charge to be on the lookout for in New York is the steep Mortgage Recording Tax. “It’s equal to up to 2 percent of the amount you borrow of a purchase for a new house or a refinance depending where in New York that you live,” says Ariel Sasson, a Long Island real estate attorney based in Manhattan. “There are, however, ways to get around it if you are savvy: A CEMA -- or Consolidation Extension & Modification Agreement -- helps clients save tens of thousands of dollars off New York State mortgage tax costs and their overall closing costs."
While CEMAs are more commonly used in refinancings, they can be equally effective in purchase transactions to save borrowers money on the mortgage recording tax. There are still, however, CEMA processing, preparation and recording fees. And be aware that not all lenders participate in NY CEMA transactions.
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