On a New York refinance, mortgage recording tax can be limited to the new money when the old lender assigns its mortgage to the new lender and the two mortgages are consolidated, a structure lenders call a CEMA, under Tax Law 255.
New York charges its mortgage recording tax when a mortgage is recorded, so a cash-out refinance on a rental can owe tax on the whole new loan unless the existing mortgage is kept alive and assigned. This guide covers how that works, what it saves and the paperwork the closing needs. For the New York rules that apply statewide, see DSCR loans in New York.
How does a CEMA limit mortgage recording tax to new money?
When the old lender assigns its note and mortgage to the new lender, and the new lender records a separate mortgage for the new advance and then consolidates the two, tax is due only on the mortgage that secures the new money.
- Tax Law 255(1)(a)(i) says an additional mortgage recorded after a mortgage on which tax was paid is not taxed unless it secures new or further debt.
- The Tax Department's memo TSB-M-89(6.1)R walks through the chain: assignment to the new lender, a new mortgage for the new advance, then consolidation, with no further tax on the unpaid principal carried over.
- Advisory opinion TSB-A-00(1)R says recording an assignment of a note and mortgage is not itself subject to mortgage recording tax.
Exception: The old mortgage must still be of record and not discharged. A mortgage recorded after the prior one was discharged is not a supplemental mortgage, and mortgage recording tax must be paid when it is recorded, per TSB-A-20(1)R.
According to the NYS Department of Taxation and Finance, TSB-M-89(6.1)R, TSB-A-00(1)R and TSB-A-20(1)R, as of October 2026.
How much can a CEMA save on a rental refinance?
On a $400,000 refinance that pays off a $300,000 balance on a one- or two-family rental outside New York City and outside the MCTD, the state recording tax drops from $3,975 on the full loan to $975 on the $100,000 of new money.
| Tax component | Tax on full $400,000 loan | Tax on $100,000 new money |
|---|---|---|
| Basic tax ($0.50 per $100) | $2,000 | $500 |
| Special additional tax ($0.25 per $100) | $1,000 | $250 |
| Additional tax ($0.25 per $100, after the $10,000 exclusion) | $975 | $225 |
| Total | $3,975 | $975 |
Exception: For property with six or fewer dwelling units, the lender pays the special additional tax and can't pass it to the borrower under Tax Law 253(1-a)(a), unless the lender is a natural person or a credit union, so the borrower's share here is $2,975 without the consolidation and $725 with it. Inside the MCTD the additional tax is $0.30 per $100.
According to the NYS Department of Taxation and Finance, Mortgage recording tax, TB-MR-5 on the $10,000 exclusion and Tax Law 253, as of October 2026.
Does a CEMA work for an LLC's business-purpose rental loan?
Tax Law 255 turns on whether tax was paid on the prior mortgage and whether new debt is secured, and neither the statute nor the Tax Department's refinancing memo limits the rule to owner-occupied homes or consumer loans.
- Section 255(1)(a)(i) does not mention owner occupancy or loan purpose.
- TB-MR-5 says the $10,000 exclusion for one- and two-family dwellings applies only once to each mortgage that isn't supplemental to a prior mortgage.
Exception: No official source reviewed here states in so many words that the rule covers an LLC's investor loan. The 1989 memo also notes that the 1989 change to Real Property Law 275 replaced the owner's option to demand an assignment with a certificate of discharge on payoff, so ask both lenders early whether they will assign and consolidate.
According to N.Y. Tax Law 255, New York State Senate, and the NYS Department of Taxation and Finance memo TSB-M-89(6.1)R and TB-MR-5, as of October 2026.
What paperwork does a CEMA closing need?
The exemption has to be claimed with a sworn statement of the supporting facts filed with the recording officer at recording under Tax Law 255(2)(a).
- The 1989 memo requires a sworn statement with a recorded assignment that the assignee is not a nominee of the mortgagor and that the mortgage still secures a real obligation.
- TB-MR-5's examples treat the consolidation agreement as needing a section 255 affidavit.
Exception: The title company usually prepares these filings. Confirm the assignment and affidavit are in the closing package before you sign.
According to N.Y. Tax Law 255 and the NYS Department of Taxation and Finance memo TSB-M-89(6.1)R, as of October 2026.
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This page is general education about business-purpose real estate financing and state law as published by official sources on the date shown. It is not legal, tax or lending advice, not an offer to lend and not a rate quote. Laws and lender guidelines change; confirm current rules with the lender, the title company and your own attorney or tax adviser.