Navigating the world of real estate can be confusing, especially when it comes to understanding the various taxes and fees associated with purchasing a home. In New York, one such tax is the mortgage recording tax, which can add up quickly for homebuyers.
In this article, we will explore the ins and outs of mortgage tax in New York, including what it is, how it's calculated, and who is responsible for paying it.
Mortgage tax, also known as mortgage recording tax, is a tax imposed by the State of New York and some local governments on new mortgages that are recorded with the county clerk's office. This tax is paid by the borrower when a mortgage is registered, and its purpose is to generate revenue for the state and local municipalities.
The mortgage tax rate in New York varies depending on the property's location and whether it is a residential or commercial property. The tax is calculated as a percentage of the mortgage amount, with rates ranging from 0.10% to 1.925%.
The mortgage tax rate in New York State is typically 1.0% for residential properties. However, this rate can increase due to additional taxes levied by local governments. In New York City, for instance, the combined state and city mortgage tax rate for residential properties is 1.8% for loans under $500,000 and 1.925% for loans over $500,000.
For commercial properties, the mortgage tax rate is generally higher, with rates in New York City reaching as high as 2.8%.
In New York, the borrower is responsible for paying the mortgage tax. The tax must be paid at the time of closing on the property, and the mortgage cannot be recorded until the tax has been paid in full. The borrower's lender or closing agent usually collects the tax payment and submits it to the appropriate government office.
There are certain exemptions and reductions available for specific borrowers and mortgage types:
First-time homebuyers: In some cases, first-time homebuyers may be eligible for a reduced mortgage tax rate. This varies by county, so it's essential to check with your local government for specific details.
Mortgage refinancing: When refinancing a mortgage, borrowers may be eligible for a mortgage tax reduction or exemption if the new mortgage is with the same lender and does not increase the principal balance.
Government-backed loans: Some government-backed loans, such as VA, FHA, and USDA loans, may be exempt from mortgage tax. However, this depends on the specific loan program and borrower qualifications.
Mortgage tax is an essential aspect of the home-buying process in New York, and understanding the tax rates and payment responsibilities is crucial for potential homeowners. By familiarizing yourself with the mortgage tax structure and seeking professional guidance from a mortgage advisor or real estate attorney, you can navigate the home-buying process with confidence and avoid surprises at the closing table.
