The Quick Read: In New York, the biggest government charge on an FHA cash-out refinance is a percentage-based mortgage tax, not a small clerk’s fee. It is figured on the size of the new loan, not on the cash you take out. You either pay it at closing or fold it into the loan, where it eats into the equity you can reach. A consolidation agreement called a CEMA can shrink the taxable amount, but whether you get one depends on the lenders involved.
Key Takeaways
- The tax follows the new loan balance. A bigger loan means a bigger tax, even if your cash out is modest.
- The tax and the county clerk’s recording fees are two different charges. They sit on different lines of your paperwork.
- The FHA cash-out reaches 80% of the appraised value on a home you have owned and lived in for 12 months. Costs financed inside that ceiling shrink your cash.
- A CEMA can cut the tax. It is lender-dependent, not an FHA entitlement.
What Are You Actually Paying When the Mortgage Is Recorded?
You pay two kinds of government charges. One is a small filing fee for the county to record your mortgage and index it in the public record. The other, in New York, is a mortgage recording tax. That tax is the large one.
Most online closing-cost lists mention “recording” in a single line. In New York that single line hides most of the money. The tax is a percentage of the loan amount. The filing fee is a modest flat charge.
The tax has layers. New York State charges a basic tax and additional taxes. Some counties and cities add a local piece. Within the New York City area, the city layer is the largest, with a higher tier on larger loans. Counties outside the city have their own mix, so a Long Island refinance and an upstate refinance do not carry the same bill.
Across the wholesale programs I place files with, the FHA cash-out refinance program works the same way in every state. The 80% ceiling and the 12-month ownership and occupancy rule travel with the loan. What changes by state is the government charge sitting on top.
How Is an FHA Cash-Out Underwritten, Step by Step?
Think of it as a chain. Each link affects how much cash is left after the tax.
1. Eligibility screen. You must have owned the home and lived in it as your main residence for 12 months before the case number is assigned. Payment history, credit, income and debt ratios all get reviewed. Base ratios start at 31/43 (housing and total debt as a share of income). Documented compensating factors can stretch them to 40/50 at the top tier, though the automated finding governs most files. Equity alone does not qualify you.
2. Appraisal. The appraisal sets the value. The 80% ceiling applies to that value, and it counts the whole new first mortgage, including any upfront mortgage insurance you finance. The appraisal therefore decides how much room exists.
3. Loan Estimate. The lender issues this form. The New York tax shows up in the government-charges section, not as a “recording fee.” More on that below.
4. Title and closing. You pay the tax at closing, and the title company sends it to the county with the mortgage for recording.
5. Recording. The tax is computed on the principal the new mortgage secures. In New York City, residential recordings for one- to three-family homes and individual condos run through the city register.
6. Closing Disclosure. The final form itemizes the tax and the recording fees. Compare it line by line against your Loan Estimate.
Two things drive the final cost. The size of the new mortgage sets the tax base. The property type and location set the rate tiers.
Tax, Fee or Transfer Tax? How the Paperwork Labels It
New York’s charge is a tax on the loan, and the federal disclosure forms treat it that way. This matters because borrowers scan for “recording fees” and walk past the largest item.
Under the federal rule that governs the Loan Estimate, a charge based on a percentage of the loan amount is a transfer tax, not a recording fee. The CFPB’s commentary to the disclosure rule says the name used under state law does not decide the label. The Closing Disclosure then lists the deed and mortgage recording fees on their own lines.
| Charge | What it is | How it is figured |
|---|---|---|
| Mortgage recording tax | State and local tax on the loan | Percent of loan amount |
| Recording fee | County charge to file and index | Flat, per document |
| Transfer tax | Percent-of-loan charges, by the form’s definition | Percent of loan amount |
If your estimate shows only a small recording line, ask where the mortgage tax appears. A missing tax is a mistake in the estimate. It is not a saving.
Who Pays Which Slice?
The lender generally bears the “special additional” quarter-point on one- to six-unit residences. You pay the basic and additional state taxes plus any local layers. Some nonprofit lenders are treated differently.
One more break: on a one- or two-family home, the first slice of principal is excluded from one part of the tax. That exclusion disappears if the parcel is mainly a commercial property. For a typical owner-occupied house, it applies.
For a one-, two- or three-family home in New York City, the state and city layers together run roughly 1.8% to 2% of the loan, with the city’s higher tier adding a bit more on larger loans. The NYC Department of Finance’s mortgage recording tax report defines which properties count as residential and lists the city tiers. Treat those figures as a rough guide. Your Loan Estimate is the document that counts.
What Does It Look Like in Practice?
Here is a modeled scenario in percentages, with no dollar amounts. These are assumptions, not market data.
Say the appraisal sets your home’s value at 100%. Your current mortgage balance equals 50% of that value. You refinance to the 80% ceiling in New York City, on a one-family home.
| Line | Without CEMA | With CEMA |
|---|---|---|
| New loan (including financed upfront premium) | 80% of value | 80% of value |
| Tax base | 80% of value | About 30% of value |
| Tax at roughly 1.8% to 2% of base (modeled) | About 1.5% of value | About 0.5% of value |
| Paid off to old lender | 50% of value | 50% of value |
| Cash before other costs | Roughly 30% of value, less costs | Roughly 30% of value, less costs |
Read the table this way. The tax falls on the whole new loan unless a CEMA moves part of the old balance out of the base. The cash-out amount is the same in both columns. The difference is the cost of getting it.
The upfront mortgage insurance premium is 1.75% of the base loan, and it can be financed. Financing it raises the loan balance, which raises the tax base slightly. It also uses up some of the room under the 80% ceiling.
Annual mortgage insurance also applies. It depends on term, loan amount and LTV. Above 90% LTV on a thirty-year loan it lasts for the term. At or below 90%, it ends after eleven years. A cash-out at the 80% ceiling lands in the second group. That is how the premium schedule works. It is not a price quote. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
How Does a CEMA Change the Math?
A CEMA, short for Consolidation, Extension and Modification Agreement, lets New York refinance paperwork merge your existing recorded mortgage into the new one. The tax is then paid on “new money” only. An attorney’s explainer on New York CEMAs walks through the mechanics.
The catch is that your current lender must assign the old mortgage rather than satisfy it. Many servicers do not cooperate, or their process adds friction. Attorney, processing and extra recording costs can eat into the savings. On a small gap between old balance and new loan, a CEMA may not be worth it.
Here is the honest FHA answer. FHA rules do not make a CEMA an entitlement. Whether it works on your loan depends on the wholesale lender and the investor behind it. Some programs accept New York CEMAs on one- to four-unit refinances. Others decline them. Ask early, before the appraisal is ordered, so the answer shapes your choice rather than surprising you.
A CEMA makes the most sense when the existing balance is large relative to the new loan. In that case most of the tax base disappears. It makes the least sense when you are borrowing nearly all the value and the old balance is small.
Where the General Rule Breaks
Co-ops. The mortgage recording tax does not apply to co-op loans because you borrow against shares, not real property. Whether FHA will lend on a given co-op is a separate question that depends on the building and lender.
Condos and one- to three-family homes. New York City treats these as residential for the city tier. Property type decides which tier applies.
Inherited homes. The 12-month occupancy requirement can be waived for an inherited home. If you rent it out after inheriting, the clock restarts.
Streamline refinances. HUD says an FHA Streamline cannot finance closing costs into the new loan and limits cash back. Those streamline limits do not carry over to the cash-out. Cash-out is full underwriting with an appraisal.
Outdated caps. Older articles cite 85% or 95% for FHA cash-out. Those are history. HUD Mortgagee Letter 2019-11 cut the cap to 80% of adjusted value to protect the FHA insurance fund. A Hawaiian Home Lands program is the one carve-out.
Lender overlays. Some lenders add their own rules on top of HUD’s, such as stricter treatment of recent late payments. Those are lender-level choices, so a “no” from one lender is not a “no” from all.
Paid in Cash or Rolled Into the Loan?
This is your real decision. The tax is typically paid out of proceeds or financed within the 80% cap, as the lender’s disclosure shows.
Paying separately raises the cash you bring to closing. Financing inside the cap lowers the cash you receive. Financing also raises the balance on which interest and mortgage insurance accrue. A bigger balance means more cost over the life of the loan.
Rolling costs into the loan has a hard edge. If your balance already sits near 80%, there is little room left. The tax and the premium compete for the same space as your cash.
Use this checklist when you review the Loan Estimate:
- Find the mortgage tax line. Confirm it is there.
- Ask what the tax is figured on, and which layers apply to your county.
- Ask whether the lender pays the quarter-point.
- Ask whether a CEMA is available and what it adds in legal and processing cost.
- Ask whether costs are financed within the 80% ceiling or paid from proceeds.
- Compare your net cash against the Closing Disclosure.
Government charges are set by law. Title and settlement fees are the items you can shop.
If you are weighing alternatives, a home equity loan or line of credit may carry a different mix of closing costs. Each also leaves your first mortgage in place. That can matter if the loan you have is one you want to keep.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Your Next Step
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Every program figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Key Terms Defined
Mortgage recording tax: A New York state and local tax charged as a percentage of the principal a recorded mortgage secures.
Recording fee: A flat county charge to file and index a document, such as a deed or mortgage, in the public record.
CEMA: A New York agreement that merges an existing recorded mortgage into a new one so the tax is paid on the new money only.
Upfront mortgage insurance premium: FHA’s one-time charge of 1.75% of the base loan, which can be financed into the loan.
Appraised value: The appraiser’s opinion of what the home is worth. The 80% ceiling is applied to it.
Seasoning: The waiting period between buying a home and refinancing it. For an FHA cash-out, it is 12 months of ownership and occupancy.
Frequently Asked Questions
Is the New York mortgage tax the same as a recording fee?
No. The recording fee is a small flat filing charge. The tax is a percentage of the loan, and the federal disclosure forms group percent-of-loan charges with transfer taxes. They appear on different lines.
Does the tax apply when I refinance, or only when I buy?
It applies on a refinance too, because a new mortgage is being recorded. A CEMA is the usual way to reduce what is taxed. Without one, the tax is figured on the whole new principal.
Can I roll the tax into the loan?
Usually, within the 80% ceiling, as your lender’s disclosure shows. It lowers the cash you receive and raises the balance that accrues interest and insurance. Paying it separately keeps the loan smaller but raises cash to close.
Does a CEMA work on an FHA loan?
Sometimes. No FHA entitlement guarantees one. It depends on the wholesale lender, the investor behind it and your current servicer’s willingness to assign your old mortgage. Ask before you commit to an appraisal.
How much of the tax do I pay versus the lender?
The lender generally bears the quarter-point on one- to six-unit residences. Your Loan Estimate shows the split.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see FHA loan programs.
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References
1. CFPB, Regulation Z §1026.37 commentary
2. NYC Department of Finance, Mortgage Recording Tax Statistical Profile
3. Andelsman Law, New York CEMA and mortgage tax reduction
4. HUD, FHA Streamline Refinance
5. HUD Mortgagee Letter 2019-11
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Prepare for an FHA Cash-Out Appraisal and Repair Conditions · Conventional vs FHA Cash-Out for a Homeowner Based on Credit and DTI · Can You Refinance Out of FHA With a Conventional Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.