Understanding Closing Costs- What is Mortgage Recording Tax?

By kalantarovlaw | Real Estate | 0 Comments

What is Mortgage Recording Tax?

When you buy a home you will notice a number of fees and taxes that are charged to you or the other party at closing. Quite often buyers and sellers know little about what they are paying for and why. We have already discussed one of these charges, Transfer Taxes, in a previous article.

CLICK HERE to Read my article on Transfer Taxes

Now it is time to learn about Mortgage Recording Taxes.

The Mortgage Recording Tax is state-imposed tax that is collected to document the loan transaction. This is not to be confused with mortgage interest or real estate property taxes. Mortgage recording tax is paid when you take out a mortgage. Not all states collect a mortgage recording tax. In fact, New York State is one of only a handful of states that imposes this tax. A tax is charged when mortgages for property in New York State are recorded. The New York City Register’s Office collects this tax for all boroughs except for Staten Island, where the Richmond County Clerk does the collection.

It should be noted that mortgage taxes are not collected on cooperative units because cooperative units are not real property.

Who Pays the Mortgage Recording Tax?

The mortgagor/buyer (the borrower in a mortgage) is responsible for paying the mortgage recording tax which is defined by the NYS Department of Taxation and Finance as “an excise tax on the privilege of recording a mortgage.”

Calculating the Mortgage Recording Tax Owed

The amount due for mortgage recording tax depends on (1) the amount of the mortgage AND (2) the county in which the real estate in question is located. In addition to the City imposed mortgage recording tax, the tax consists of the following state-imposed taxes: basic tax, additional tax, and special additional tax.

Below is a chart that details the mortgage recording taxes for properties in New York City (New York, Bronx, Kings, Queens, and Richmond).

**The RATE is for EACH $100 of the mortgage amount.**

• All mortgages securing less than $500,000
  • New York City Tax                $1.00
  • Basic Tax                                $0.50
  • Special Additional Tax         $0.25
  • Additional Tax                       $0.30
  • TOTAL:                                $2.05

• Mortgages of one-, two-, or three-family houses and individual residential condominium units, securing $500,000 or more
  • New York City Tax                $1.125
  • Basic Tax                                $0.50
  • Special Additional Tax         $0.25
  • Additional Tax                       $0.30
  • TOTAL:                                $2.175
• All other mortgages securing $500,000 or more
  • New York City Tax                 $1.75
  • Basic Tax                                 $0.50
  • Special Additional Tax          $0.25
  • Additional Tax                        $0.30
  • TOTAL:                                 $2.80

Special note regarding mortgage tax rates for all counties in New York:

• A $30.00 exemption applies if the property is 1-2 family and the loan amount is $10,000 or more.
• The lender pays 0.25% of the mortgage tax if the property is 1-6 family.

CLICK HERE for MT-15 NYS Mortgage Recording Tax Return

EXAMPLE: If you are taking out a mortgage in the amount of $550,000 to purchase a one-family home in New York City, the total amount due for mortgage recording taxes is $11,962.50  (2.175% X $550,000). You, the borrower, will be liable for $10,557.50  (1.925% – $30 exemption) and the lender will be responsible for $1,375.00.

Avoid Paying Mortgage Taxes when REFINANCING

To avoid having to pay mortgage tax twice, an exemption exists in accordance pursuant to Title 11, Chapter 26, Administrative Code, Tax Law Section 255, which allows borrowers to pay mortgage tax on the difference between the new loan amount and the principal amount of the old loan. This difference is known as “new money.”  This amounts to huge mortgage tax saving, which reduces your closing costs. The borrower is only liable for mortgage recording tax on “new money.”

This is discussed in more detail in my article entitled: “CEMA- What is it and How Can I Save on Mortgage Tax?”

For more information on Mortgage Recording Taxes in New York and other related issues call Real Estate Attorney, Sergey Kalantarov, Esq. of Kalantarov Law, PLLC at (516) 953-9801.