What Mortgage Tax Is and How You Can Reduce It

Buying a home for the first time always involves a bunch of fees you need to take note of. A good example? The mortgage recording tax.?

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This could play a big factor in how high your potential home could be priced at now.?

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So with that being said, what does it involve exactly? Can you even bring it down? In this newsletter, we’ll explore what the mortgage recording tax is, its mechanics, and tips to reduce it.

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What Exactly is a Mortgage Recording Tax?

The mortgage recording tax is a governmental charge applied when you obtain a mortgage.

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This fee serves to document the mortgage agreement officially and is calculated as a percentage of the loan amount.?

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The specific percentage varies depending on where your property is located, and it essentially formalizes the registration of your mortgage with the local authorities, ensuring legal clarity and compliance with regulatory requirements.

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How Does It Impact You?

When your lender records your mortgage, you pay the tax. Usually, you cover this cost, but sometimes the lender or seller might share it.

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The Financial Hit

This tax can be pricey. For instance, in places like New York City, it can be as high as 2.175% for loans over $500,000. That means a $600,000 mortgage could rack up $13,050 in tax. So, planning for this is key when budgeting for a home.

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Cutting Your Tax Bill

You can reduce this tax burden in a few ways:

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• Assume an Existing Mortgage: Instead of getting a new mortgage, take over the seller’s. This move can bypass or slash the tax.
• Consider CEMA: In states like New York, a CEMA can merge your old and new mortgages, trimming the taxable part. This can save you thousands.
• Negotiate with the Seller: Sometimes, sellers will pay some or all of the tax to seal the deal faster, especially in a buyer's market.
• Get Expert Advice: A real estate lawyer or mortgage broker can suggest other ways to trim your tax bill based on your situation and local rules.

Tax rates and rules change by state and even within states. For example, Florida has lower rates, and some states don’t have this tax at all. Know your local rules to avoid surprises.

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Mortgage recording taxes can hike up your costs. Knowing what they are and how to trim them can save you cash.?

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Whether you're assuming a mortgage, using a CEMA, negotiating with the seller, or seeking pro help, there are ways to lighten the load.

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Let’s connect so we can get started on your search for deals to add to your portfolio. Call me at 917-627-5677?or send an email to [email protected].?

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Talk soon,?

Eli

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