The Quick Read: A CEMA cuts New York mortgage recording tax by taxing only the new money in a refinance, not the balance that was already taxed. The saving equals the existing unpaid balance times the local tax rate, so it grows with the balance carried over, not with the size of the new loan. It applies only where a loan-based mortgage tax exists, which the sources here describe as New York. A CEMA does not change DSCR underwriting.
Key Takeaways
- A cash-out refinance normally taxes the full new loan. A CEMA taxes only the gap between the new loan and the existing balance.
- Cash-out and financed closing costs sit inside the gap. They are taxed either way.
- High existing balance and modest cash-out is the best case. Low balance and large cash-out is the weakest.
- The old lender must agree to assign its mortgage. It has no legal duty to.
- Rent coverage, leverage and reserves are underwritten the same way with or without a CEMA.
Key Terms Defined
CEMA: A Consolidation, Extension and Modification Agreement, which merges an existing mortgage with a new gap mortgage into one lien.
Gap mortgage: The new debt above the existing unpaid principal balance, which includes cash-out and any financed costs.
UPB (unpaid principal balance): What the borrower still owes on the existing recorded mortgage.
Mortgage recording tax: A percentage-based tax on the amount a mortgage secures. It is separate from flat county recording fees.
Assignment of mortgage: The document that moves the old mortgage to the new lender instead of paying it off and releasing it.
DSCR: The ratio of rent used for lender review to the full monthly obligation (principal, interest, taxes, insurance and any HOA dues).
DSCR Cash-Out Calculator
Run the cash-out numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 8, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 8, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Two Buckets of Recording Cost
A DSCR cash-out carries two different recording charges. One is a flat county fee for putting documents on the record. The other is a percentage-based mortgage tax, charged only in some places.
The flat fee barely moves with loan size. The percentage tax moves with every dollar the mortgage secures. That is why loan size matters here at all.
This article covers the percentage tax, and only the New York version of it. The sources reviewed describe the CEMA as a New York tool, and nothing here should be read as a rule for other states. If your collateral sits outside New York, ask the title company whether any loan-based mortgage tax applies at all. Florida’s version is a different tax on a different base, covered in Lendmire’s look at Florida doc stamps on a DSCR cash-out by loan amount.
Why a Standard Refinance Taxes the Full New Loan
A standard refinance pays off the old mortgage and records a brand-new one. The new mortgage secures the entire new loan, so the tax applies to all of it. The old balance gets taxed a second time.
On a cash-out, the new loan is bigger than the old balance. Across Lendmire’s wholesale network, most cash-out programs cap leverage around 75% LTV, so the new loan cannot exceed three-quarters of value, subject to lender guidelines. Inside that ceiling, the balance you already owe is the part a CEMA can protect.
How a CEMA Changes the Taxable Base
A CEMA keeps the old mortgage alive on the record. The payoff lender assigns it to the new lender rather than discharging it. The new lender then consolidates the old loan with a new gap mortgage into a single lien with restated terms.
Tax is charged only on the gap. As a real-estate attorney explains, the new lender obtains an assignment of the old mortgage, and tax applies to the difference between the old and new amounts.
The legal footing is in state tax guidance. A supplemental mortgage can be recorded without new tax when the earlier mortgage was properly taxed and the new instrument secures no new debt. Timing matters too. The NYS Department of Taxation and Finance treats a supplemental mortgage as one recorded before the prior mortgage is discharged. That is why the old loan is assigned, not paid off and released.
On a cash-out, the gap is the cash-out plus any closing costs rolled into the loan. A CEMA never shelters that part.
The Tax Stack: What the Savings Multiply By
The saving is the existing balance times the total tax rate. In New York City, the rate depends on loan size and property type. The city component comes from the NYC Department of Finance mortgage recording tax report. It is 1.0% under $500,000 and 1.125% at $500,000 or more on 1–3 family homes and individual condos. Other buildings, including apartment buildings, pay 1.0% under $500,000 and 1.75% at $500,000 or more.
Add the state basic tax, the special additional tax and the metro-area additional tax, and the NYC totals work out as follows.
| New loan size / property type | Total NYC rate | Borrower share (lender pays 0.25%) |
|---|---|---|
| Under $500,000, any type | 2.05% | 1.8% |
| $500,000+, 1–3 family or condo | 2.175% | 1.925% |
| $500,000+, other buildings | 2.80% | Depends on unit count and lender |
For properties with six or fewer residential units, the lender normally pays the 0.25% special additional piece. That is why borrowers see 1.8% and 1.925% quoted. Exceptions exist, such as a natural-person lender or a tax-exempt lender, and the borrower may then pay that piece. The title company’s written quote shows who pays what.
Outside NYC, rates vary by county. They also change. The Tax Department has published a notice adding a county tax of $0.25 per $100 in one upstate county, which shows why any rate you read in an article is a starting point. Take the number from the title company’s quote.
How Much a CEMA Saves, by Loan Size
The saving does not depend on the new loan size alone. It depends on how much existing balance carries over. Use this rule of thumb at the borrower-share rates above: every $100,000 of existing balance carried through a CEMA saves about $1,800 under the NYC under-$500,000 tier, and about $1,925 on a $500,000-plus 1–3 family loan.
The table below uses worked examples from New York law-firm pages. They are illustrations, not quotes.
| Existing balance → new loan | Taxed on (with CEMA) | Taxed on (standard) | What it shows |
|---|---|---|---|
| $200,000 → $300,000 | $100,000 | $300,000 | $1,800 vs. $5,400 at 1.8% |
| $300,000 → $450,000 | $150,000 | $450,000 | $2,700 vs. $8,100 |
| $380,000 → $390,000 | $10,000 | $390,000 | Tiny gap, near-total saving |
| $800,000 → $1.1M | $300,000 | $1.1M | Same logic at the higher tier |
| $3.0M → $3.5M (mixed deal) | $500,000 | $3.5M | A stated saving of $84,000 in NYC |
The first example comes from Moshes Law. The Brooklyn example comes from Friedman Vartolo. Read the rows top to bottom and the pattern is clear. The cash-out is taxed in every row. The CEMA only removes the tax on the old balance.
Three loan profiles
Picture an investor with a small mortgage left and a large equity pull. The old balance is low relative to the new loan, so most of the new loan is gap. The CEMA exempts little. The saving is small, and the paperwork may not pay for itself.
Say another investor owns a stabilized 2–4 unit with a large balance and wants a modest cash-out. The gap is thin. A CEMA here can remove most of the tax. This is the best case.
Now take a repeat refinancer on a BRRRR-style cycle. Each cycle’s tax would otherwise hit the whole new loan again. The CEMA stops the earlier taxed balance from being taxed twice. The benefit compounds.
Where the Savings Shrink or Disappear
Net saving is the existing balance times the rate, minus CEMA costs. Those costs are the payoff lender’s assignment fee, extra attorney and title work, and added paperwork.
One New York firm describes the existing lender’s assignment fee as in the $1,100 range. That is a single, dated data point, so treat it as a rough marker. At 1.8%, that fee alone is covered by roughly $61,000 of carried-over balance. Extra legal work raises the break-even. On low balances in low-tax counties, the honest answer can be “not worth it.”
Four patterns shrink the benefit:
- A small existing balance relative to the new loan.
- A large cash-out, which is all gap.
- Closing costs financed into the loan, which also become gap.
- Low-rate jurisdictions, where each carried-over dollar saves less.
Does a CEMA Work on a DSCR Loan?
It can, but it depends on the lender and the closing attorney, not on the DSCR label. The sources reviewed describe CEMAs on bank refinances. None of them addresses DSCR files directly. On the program side, a CEMA is underwritten like any other refinance, so it does not lower or raise qualification requirements.
Here is what stays the same on a DSCR cash-out placed through Lendmire’s wholesale network, subject to lender guidelines:
- Cash-out leverage tops out around 75% LTV.
- About 6 months of ownership seasoning is the common expectation, measured from title recording.
- 1.00 coverage is where select programs start, and stronger ratios open better pricing and leverage.
- Reserves commonly run around 6 months of PITIA, stepping up to about 9 months above $1,500,000.
- Standard programs reach up to $3,000,000.
Recording tax is a closing cost. It sits outside the coverage calculation, which compares rent to PITIA only. It does reduce what you net from the cash-out, because part of the proceeds goes to pay the tax. Lendmire’s piece on how much cash an investor cash-out refinance releases after costs walks through that side of the file. For the program basics, see the complete DSCR loans guide.
One gap needs saying plainly. DSCR investors often have an existing loan from a private lender, a hard-money lender or another DSCR lender. The research found nothing on how willing those holders are to assign. Treat each holder as unknown until it answers in writing.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Where the General Rule Breaks
- The old lender says no. Lenders are not obligated to assign. Staying with your current lender is usually simpler. If you switch lenders, the original lender must approve the assignment, and that can trigger fees.
- Second liens and HELOCs. Most second-lien holders will not allow assignment. A second lien that is not subordinated must be paid off, and its balance joins the taxable gap. One firm says a CEMA is not an option for HELOCs, home-equity loans or second mortgages.
- The old tax was never paid. A CEMA exempts only debt that was already properly taxed.
- The old mortgage is already discharged. There is nothing left to consolidate. The Tax Department has also warned against reusing dormant mortgages whose debt was paid off.
- Spreading the lien. A lien extended to additional property, or into a different county or city, can trigger extra tax. Have counsel confirm before any cross-collateral structure.
- Property type. Sources conflict. One says eligibility is limited to 1–3 family homes and condos. Another says it also covers mixed-use and commercial buildings. The tax statute itself is not limited by property type, but the rate tiers and the lender-paid piece differ. Treat it as typically available on 1–4 unit and larger New York investment property, subject to the lender’s willingness. Separately, manufactured homes, log homes and barndominiums are not offered in Lendmire’s DSCR network.
- Co-ops. The tax applies to real property, not co-op shares, so a CEMA does not apply.
- Entity-held property. The sources do not address LLC borrowers. Ask closing counsel whether the entity changes the document set.
Step by Step: What a CEMA Cash-Out Looks Like
1. Confirm the existing mortgage is recorded, was properly taxed and has not been discharged.
2. Ask the existing lender whether it will assign. Get the answer in writing.
3. Have closing counsel review the title commitment’s mortgage schedule. The new lender’s attorney uses it to decide which documents to collect, such as the assignment, allonges and copies of the notes and mortgages.
4. The payoff lender assigns the old mortgage to the new lender instead of discharging it.
5. The new lender records the CEMA, consolidating the old balance and the gap into one lien. Tax is calculated on the gap only.
6. Reconcile the settlement statement against the title company’s written quote.
A CEMA adds paperwork and coordination compared with a standard refinance. Plan the extra document requests into the file from the start.
Pre-Quote Checklist
Raise the CEMA at application, not at closing. Ask:
- Will the current lender assign the mortgage, and at what fee?
- Was New York mortgage tax paid on the existing loan?
- Does any second lien sit behind it?
- What is the recording-tax total with a CEMA and without one?
- Who pays the 0.25% special additional piece?
- What does closing counsel charge for the CEMA?
Compare the written answers to the carried-over balance times the local rate. If the result is thin, skip the CEMA and take the standard route.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Frequently Asked Questions
Does a CEMA eliminate mortgage recording tax?
No. It exempts only the existing balance that was already taxed. Cash-out and financed closing costs are new money, and they are still taxed.
Is the savings based on the new loan amount?
No, it follows the existing unpaid balance and the local rate. A large cash-out on a small existing balance saves little, even if the new loan is big.
Can any refinance be done as a CEMA?
No. The old lender has to agree to assign its mortgage, and a mortgage that was already discharged cannot be consolidated. Second liens usually cannot be carried along.
Is the 1.8% or 1.925% figure the full tax?
No. Those are the borrower’s NYC share where the lender pays the 0.25% special additional tax. The totals are 2.05% and 2.175%. In some cases the lender’s share shifts to the borrower.
Does a CEMA change DSCR lender review?
No. A CEMA is underwritten like any other refinance. Rent coverage, LTV, seasoning and reserves are reviewed the same way, subject to lender guidelines.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Nothing here is a commitment to lend.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. NYS Department of Taxation and Finance, advisory opinion on supplemental mortgages
3. NYC Department of Finance, mortgage recording tax report
5. Friedman Vartolo LLP, What Is a CEMA
6. Skolnick & Ben-Ezra, Purchase CEMA
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much an Investment Property HELOC Lends at Each Credit Tier · How to Structure DSCR Cash-Out Loans so One Rental Can Sell Alone · DSCR vs Conventional Cash-Out for a Retiree Living on Rents and Assets
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.