What Is the Mortgage Recording Tax (MRT) in New York City?
How Much Is the Mortgage Recording Tax in NYC?
How To Calculate NYC Mortgage Recording Tax
Mortgage Lender Contribution for the NYC Mortgage Tax
Who Pays the Mortgage Tax in New York?
How is the Mortgage Recording Tax Collected?
How to Avoid the NYC Mortgage Tax
NYC Mortgage Recording Tax Bottom Line
The mortgage recording tax (often shortened to MRT or simply the mortgage tax) is a tax levied by New York State and NYC on all new mortgage loans.
The MRT in New York City applies to all new mortgages, including refinance mortgages, and is a percentage of your loan size and not the purchase price. The mortgage recording tax in NYC only uses mortgage debt on real property, meaning condo apartments, townhouses, and multi-family properties. If you're buying a co-op, you won’t have to pay any mortgage recording tax.
The NYC Mortgage Recording Tax rate varies between 2.05% and 2.175%, however, the exact tax differs depending on the size and category of the home mortgage. Additionally, the buyer’s lender usually pays 0.25% of the MRT, which makes the effective mortgage tax rates in NYC 1.8% for loans under $500K and 1.925% for loans over 500K.
The mortgage tax you pay is comprised of both a New York City tax together with New York State’s Basic Tax, Special Additional Tax, and Additional Tax. Officially, the MRT rates are 2.05% for loans under $500K and 2.175% for loans over $500K, however, as we mentioned, the lender usually pays for a small portion of it. Commercial properties have higher mortgage recording tax rates.
The mortgage recording tax is not only for NYC; however, the NYC mortgage recording tax is significantly higher than the tax amount charged in other counties in New York. For example, in Westchester County, the total mortgage recording tax is just 1.3%.
In other New York counties, the mortgage recording tax usually is 1% or 1.25%; however, some counties such as Ulster and Madison charge as low as 0.75%. You can review the tax tables yourself on Form MT-15, commonly referred to as the mortgage tax return.
To calculate your NYC mortgage tax, you'll need to multiply the amount of your loan by your effective tax rate. For example, if you have a $1,000,000 mortgage, you'd owe a 2.175% mortgage tax or $21,750. However, your lender will typically pay $2,500 of that meaning the total cost to you would be $19,250.
For residential transactions, the home loan lender will typically pay 0.25% of the overall mortgage recording tax.
For hard money loans and commercial deals, the lending institution will typically not pay on any of the mortgage tax.
As a bonus, you’ll also get a $30 contribution towards the NYC mortgage tax from the city. Very generous, we know.
The buyer usually pays the mortgage recording tax in New York City. Unlike other closing expenses in NYC, such as transfer taxes in a sponsor unit sale or the mansion tax, which may be flexible, it is extremely unusual to see the mortgage recording tax being paid by anybody else other than the buyer.
The amount of the tax depends solely on the buyer’s financial resources and how much they ultimately borrow.
Therefore, it does not make good sense to ask the seller to cover the mortgage recording tax, considering that the quantity of the tax depends entirely on the funding decisions of the buyer.
MT-15, or the “Mortgage Recording Tax Return,” is a New York State Department of Finance form that must be filled out correctly for your mortgage to be recorded.
The New York City Register’s Office collects this tax for all the boroughs except Staten Island. The Richmond County Clerk gathers this tax for Staten Island.
Additionally, property records for Manhattan, Brooklyn, Queens, and the Bronx are recorded online using the NYC ACRIS system, which is NYC’s online database of public property records.
Documents for Staten Island are recorded in person at the Richmond County Clerk’s Office.
1. Buy All Cash
The NYC mortgage recording tax only applies if the purchaser will be utilizing some financing. If no mortgage is obtained, like in the case of an all-cash transaction, no tax is owed to New York State or City, so the simplest way to avoid the tax is to pay cash and not get a mortgage.
2. Purchase a Co-op
The mortgage recording tax does not apply to loans backed by co-op apartment shares because co-ops are technically not real property. Since co-op buyers do not have to pay the mortgage recording tax, this is one of the primary reasons that buyers’ closing costs are substantially higher for condos compared to co-ops in New York City.
3. Reduce the Mortgage Recording Tax With a CEMA Loan
A great way to decrease the amount of the mortgage tax is to work out a purchase CEMA loan with the seller.
For a purchase CEMA loan to occur, the seller needs to have a healthy amount of loan balance remaining on their home. The seller’s bank can appoint the seller’s remaining loan balance to the buyer’s bank if requested. As a result, the buyer would just need to pay the mortgage recording tax in NYC on any new loan quantity above the seller’s mortgage amount.
4. Get Seller Approval For a Purchase CEMA
Obviously, for a buyer to take a CEMA mortgage, the buyer requires the seller’s approval. A smart seller may ask you to divide the expense savings with them.
You can make sure the seller understands that they will likewise be saving for them as well because they will have reduced New York State transfer taxes, which are typically 0.4% of the sale price.
If a purchase CEMA is used, the seller will only pay the NYS transfer tax on the price less than the amount of the mortgage transferred. The NYC transfer tax amount is not affected, whether you purchase a CEMA or not. Purchase CEMA loans can also be used for homeowners who want to refinance an existing home loan.
Typically, lenders are more willing to approve a purchase CEMA if they will be retaining the home loan and not assigning the loan to a new lender.
Purchase CEMA transactions are overly complicated and require the negotiating skills and experience of a real estate lawyer knowledgeable about such transactions, along with a buyer’s broker who has done these kinds of deals before.
The NYC mortgage recording tax is one of the largest closing costs most buyers will need to pay when purchasing property in New York City. It's also very difficult to avoid the mortgage recording tax in New York if you're financing your home. Outside of purchasing a co-op apartment or simply paying all cash and not getting a mortgage, it is pretty much impossible to avoid the NYC mortgage tax.
There are times when you can try to reduce it with a CEMA mortgage, but generally speaking, the best way to offset your buyer closing costs is to work with a broker who will give you a buyer commission rebate. If you do this, you can expect to get 2% of your purchase price rebated to you, which will easily cover your NYC mortgage recording tax dues.