New York Mortgage Recording Tax – Ultimate Guide & FAQs

new york mortgage recording tax

In the real estate, navigating the complex landscape of taxes is an inevitable part of the journey. One such tax that often takes center stage in New York is the Mortgage Recording Tax (MRT). Whether you’re a seasoned investor or a first-time homebuyer, understanding the ins and outs of this tax is crucial for making informed decisions. We’ll explore the New York Mortgage Recording Tax, shedding light on its purpose, rates, exemptions, and implications for real estate transactions.

Understanding the New York Mortgage Recording Tax

The New York Mortgage Recording Tax is a state-imposed tax on the recording of mortgages on real property. Enacted to generate revenue for the state, this tax plays a pivotal role in real estate transactions. Unlike a property transfer tax, which is assessed when ownership of a property changes hands, the MRT is triggered when a mortgage is recorded.

1- Rates:

The tax rates for the Mortgage Recording Tax vary depending on the location of the property. In New York City, the rates are higher compared to the rest of the state. Generally, the tax is calculated as a percentage of the mortgage amount, and the rates can range from 1.8% to 2.8%. Buyers and lenders need to be aware of these rates as they can significantly impact the overall cost of a real estate transaction.

2- Exemptions and Exceptions:

While the MRT is a common part of real estate transactions in New York, certain exemptions and exceptions exist. For instance, mortgages associated with affordable housing projects or government-backed loans may be eligible for exemptions. Additionally, refinancing transactions and certain types of modifications may be exempt from the tax, providing some relief to borrowers.

3- Implications for Buyers and Lenders:

For homebuyers, the Mortgage Recording Tax adds a layer of cost to the overall purchase. It’s essential to factor in these taxes when budgeting for a property to avoid unexpected financial burdens. On the other hand, lenders need to be aware of their responsibility to collect and remit the tax to the appropriate authorities. Failure to comply with these obligations can result in penalties and legal consequences.

4- Navigating the Process:

Navigating the New York Mortgage Recording Tax requires a keen understanding of the state’s real estate laws and regulations. Working with experienced real estate professionals, including attorneys and financial advisors, can help streamline the process and ensure compliance. Buyers and lenders alike should seek guidance to maximize potential exemptions and minimize the financial impact of the MRT.

Who Pays the NYC Mortgage Recording Tax?

Now, you might be wondering who foots the bill for this tax. The borrower typically pays the mortgage recording taxes, but in some cases, the lender must pay the special additional tax. The funds generated support various city services, making it essential for borrowers to be aware of this tax when securing a loan for property in NYC.

How Much is Mortgage Recording Tax New York?

The Mortgage Recording Tax (MRT) in New York City stands at 1.8% for loans under $500,000 and increases to 1.925% for loans totaling $500,000 or more. It’s important to note that the MRT constitutes the most significant closing cost for buyers in NYC. The amount of Mortgage Recording Tax you are required to pay is determined by the loan amount rather than the purchase price.

How to Avoid Paying the NYC Mortgage Tax?

Well, there are a few strategies. One option is to refinance your existing mortgage for an amount equal to or less than your current balance. You can also explore home equity loans for qualified expenses or consider paying cash for your property.

Where is the Mortgage Recording Tax New York Filed?

Property documents for Queens, Brooklyn, Manhattan, and the Bronx are digitally recorded through the ACRIS System. It is essential to furnish accurate Mortgage Recording Tax details and associated documents, including any exemption claims when submitting your property documents.

Is the Mortgage Tax NYC Deductible?

The sum paid for your mortgage recording tax is not eligible for deduction when filing with the IRS. Instead, you have the option to include this amount in the cost basis of your property. This inclusion can be advantageous when you decide to sell, as it contributes to the overall property value.

Does NYC Mortgage Recording Tax Apply to Co-ops?

When buying and financing a co-op, you are not required to pay the mortgage recording tax. This tax applies solely to the financing of real property, and since a co-op is not classified as real property, it’s exempt. Therefore, if you’re purchasing a co-op in NY, you can rest assured that you won’t need to pay the mortgage recording tax at closing.