In the state of New York, homeowners and potential homeowners often encounter mortgage recording tax (MRT) when they purchase or refinance a property. This tax is imposed on the mortgage loan amount and is paid to the state, county, or local government. The purpose of MRT is to provide a stable source of revenue for the government to fund various public services, such as transportation, education, and infrastructure. But who bears the responsibility for paying this tax? In this article, we will explore the answer to that question and provide an overview of the mortgage recording tax in New York.
Mortgage recording tax is a percentage of the mortgage loan amount charged when a borrower secures a mortgage loan in New York. The tax rate varies depending on the location of the property and the loan amount. As of September 2021, the basic MRT rate is 0.5% for loans up to $10,000 and 1% for loans over $10,000. However, the total MRT rate can be higher in certain areas, such as New York City, where an additional 1.125% is imposed for loans over $500,000.
In New York, the borrower (i.e., the person taking out the mortgage loan) is legally responsible for paying the mortgage recording tax. This means that when a mortgage is recorded, the borrower must pay the MRT in addition to other closing costs associated with the transaction. Typically, the mortgage recording tax is paid at the time of closing, and the payment is usually facilitated by the closing attorney, title company, or the mortgage lender.
However, in some instances, the seller or the lender may agree to pay the MRT on behalf of the borrower as part of the negotiation process. This arrangement is typically known as a "seller's concession" or "lender's credit." In such cases, the seller or lender covers the MRT cost, and the borrower is relieved from this responsibility. It is important to note that these concessions are subject to negotiation and are not mandatory by law.
Certain types of mortgage transactions are exempt from mortgage recording tax or qualify for a reduced rate. For example, mortgages taken out by government agencies, religious organizations, and certain not-for-profit entities may be exempt from MRT. Additionally, first-time homebuyers who meet specific income and purchase price requirements may qualify for a reduced MRT rate through the State of New York Mortgage Agency (SONYMA).
In summary, the borrower is primarily responsible for paying the mortgage recording tax in New York. However, there are situations in which the seller or lender may agree to cover the MRT cost. Understanding the basics of mortgage recording tax, including the rates, exemptions, and reductions, can help borrowers make informed decisions when negotiating mortgage transactions in the state of New York.