Standard Refinance
A standard refinance paying off an existing mortgage with the proceeds from a new loan. In order to decide whether this is worthwhile, the savings in interest must be weighed against the fees associated with refinancing. Other reasons to refinance include reducing the term of a longer mortgage, or switching between an adjustable-rate and a fixed-rate mortgage. A cash-out refinance is taking a loan for more than you owe on your existing mortgage. Your existing mortgage is paid off from the new loan proceeds and you receive the balance of the new loan. You might do this if you want to make home improvements or pay for a child's education. Cash-out refinancing removes some of the equity you have built up in your home. Closing costs are the fees paid when you close on a refinance loan. These fees may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys' fees; mortgage recording tax; recording fees; estimated costs of taxes and insurance; and origination, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act (RESPA), the borrower receives a "good faith estimate" of closing costs within three days of application. What is a New York CEMA? “CEMA” stands for Consolidation, Extension and Modification Agreement. A CEMA allows borrowers to save on the amount of the mortgage recording tax associated with the refinance. CEMA is a tool that can help a borrower save thousands of dollars in mortgage recording tax on the new loan amount. In reality, rather than having the original mortgage satisfied and discharged of record, the original mortgage is assigned to the new lender. The parties execute a new mortgage for refinance closing costs and for additional funds if it's a cash-out refinance, and an agreement which assigns the original mortgage to the new lender and consolidates the original and new mortgage into one mortgage. The borrower would only have to pay taxes on the amount of the new loan that exceeds the unpaid balance of the original loan, such as closing costs or cash out. Although it can be a lengthy process, a CEMA is well worth the additional time as it can save a borrower thousands of dollars in mortgage recording taxes which would otherwise be payable at closing. Contact our expert Long Island mortgage refinance attorneys today to find out how we can help you save thousands of dollars in closing costs, specifically mortgage recording tax, by refinancing your mortgage with a Consolidation, Extension and Modification Agreement (CEMA). Our mortgage lawyers represent clients in all areas of New York , including all 5 boroughs of NYC (Manhattan, Brooklyn, Queens, Bronx and Staten Island), Long Island (Nassau and Suffolk Counties), and Westchester County. We look forward to helping you. Call us today at (516) 314-8433 or e-mail us.
Will you pay tax on the sale of your home? Likely not, unless you have gains that are more than $250,000 or more than $500,000 for married couples.
Old Rule:
Until 1997, once you reached the age of 55, you had the one-time option of excluding up to $125,000 of gain on the sale of your home providing it was your primary residence.
New Rule:
Now, anyone, regardless of age, can exclude up to $250,000 of gain or $500,000 for a married couple filing jointly on the sale of a home.
That means most people will pay no tax unless they have lived there for less than 2 out of the last 5 years.
Who Qualifies for Tax-free Gains When They Sell Their Home?
To qualify for the capital gain tax exclusion on your home sale, you must meet the following IRS requirements.
Owned the home for at least 2 years. (the ownership test)
Lived in the home as your main home for at least 2 years. This is the use test. If you plan on renting your home for part of the year, study this use test carefully. The amount of gain you can exclude from taxes may be proportional to how much you use it vs. rent it.
During the 2-year period ending on the date of sale, you did not exclude gain from the sale of another home.
You can use this capital gain exclusion to avoid tax on a home sale over and over.
The Law Office of Jeanne M. Reardon assists New York property owners with strategies to protect and pass on their homes and real estate investments. To speak with an experienced New York real estate attorney, call us at (516) 314-8433 or e-mail us.
On October 3, 2015, the Consumer Financial Protection Bureau’s (CFPB) new mortgage disclosure law, also known as the TRID went into effect. TRID will help consumers be more informed regarding the closing cost.
Here are 11 things you should know about the new law:
1. Initial Good Faith Estimate (GFE) and Truth in Lending disclosure (TIL) are now combined into one new form called the Loan Estimate (LE).
2. Instead of the old forms such as the HUD-1 and Final TIL we now have the Closing Disclosure (CD). Most major lenders will prepare the CD for the borrower; some however may rely on settlement agents. The new form will describe the loan terms, projected loan payments, closing cost at closing, loan features such as assumption, escrow details, borrower’s liability at foreclosure and others. The Sellers will also have a CD statement.
3. The CD will be provided by the Lender to the consumer/borrower at least three days prior to the scheduled closing date but can be waived if consumer has a “bona fide emergency”.
4. The Lender will now provide the borrower with list of closing service providers so that they can shop for services.
5. If the following changes occur then a new CD must be issued with an additional 3 day waiting period:
APR changes 1/8 of a percent
Pre-payment penalty added to your Note
Loan is changed from fixed to variable, negative amortization
6. Closing fees subject to zero tolerance unless otherwise excepted.
10% tolerance for charges paid to third parties-charges cannot increase by more than 10%
no tolerance-charges can increase without limits if originally disclosed
0% tolerance- charges cannot increase at all
7. How do you determine what category you fall in?
Does lender allow borrower to shop for the third party services? If third party provider is on the bank list, there is a 10% tolerance, if not on the list there is no tolerance.
8. Fees that can’t increase:
fees to brokers or creditor
charges to an affiliate of broker or creditor
charges to an unaffiliated third party – if consumer not allowed to shop
transfer taxes
9. Any variation of the above must be refunded no later than 60 days after closing.
10. Seller will receive CD by or at closing. This will be prepared by the bank attorney in addition to the statement provided by the Seller’s lawyer.
11. TRID will not apply to: HELOCS, Reverse Mortgages, Commercial Loans and lenders who make 5 or less loans per year.
The Closing process will be more organized, with all the numbers worked out about a week prior to closing so there are no surprises on the closing day.