Who Pays the Mortgage Recording Tax in NYC?

The Mortgage Recording Tax in NYC is a city and state buyer closing cost which applies to new loans taken out buy a buyer when purchasing real property. The Mortgage Recording Tax (MRT) is 2.05% for loans under $500k and 2.175% for loans of $500k or more on condos and one-, two- or three-family houses.

Fortunately, the Mortgage Recording Tax is not applicable to co-ops since they’re not technically considered to be ‘real property.’ The fact that co-op buyers do not have to pay the MRT is one of the main reasons why co-op buyer closing costs on a financed purchase are less than half of what you’d pay for a condo.

How Much Is the NYC Mortgage Recording Tax?

Can the NYC Mortgage Recording Tax Be Reduced?

Does the NYC Mortgage Recording Tax Apply to Co-ops?

Is the NYC Mortgage Recording Tax Deductible?

The Mortgage Recording Tax in NYC is 2.05% for loans under $500k and 2.175% for loans of $500k or more. For residential transactions, the lender covers pay 0.25% of the buyer’s Mortgage Recording Tax.

For real property other than one-, two- or three-family houses and individual condo units, the MRT is actually a higher rate of 2.80% for loan sizes of $500k or more.

The Mortgage Recording Tax is comprised of a NYC component as well as a NYS component. The New York State component is broken down into the Basic Tax, Special Additional Tax as well as an Additional Tax.

Since the MRT applies to the loan size as opposed to the purchase price, buyers of condos and houses who put a larger amount down end up paying less in buyer closing costs. Because the Mortgage Recording Tax only applies to ‘real property’ and co-ops do not fall into this category, financed buyers of co-op apartments do not have to pay the MRT.

The fact that financed buyers of co-op units do not pay the Mortgage Recording Tax is the main reason why buyer closing costs for co-ops (1% to 2%) are less than half of what you’d pay for a comparable condo (~4%).

Sometimes. If the seller has an existing mortgage, she or he can assign that loan balance to you as the buyer. Doing this will reduce the amount of new loan money which must be originated. Any reduction in the amount the new loan originated will reduce the amount of MRT you need to pay, as the tax only applies to new loans being originated. The act of a seller assigning a loan balance to a buyer is called a Purchase CEMA.

For a Purchase CEMA to happen, the seller must agree to it. The seller also benefits from a Purchase CEMA (Purchase Consolidation Extension Modification Agreement) because she or he does not have to pay the 0.4% NYS Transfer Tax on the loan amount which is assigned to a buyer.

Because the buyer saves more money via a reduction in the MRT than the seller saves by reducing the NYS Transfer Tax bill, the buyer and seller typically negotiate and agree to split the savings equally.

No. One of the main benefits of buying a co-op aside from paying less than a comparable condo is the fact that financed buyers do not need to pay the Mortgage Recording Tax on loans taken out for a co-op purchase.

The technical reason why co-ops are exempt from the MRT is because the Mortgage Recording Tax only applies to loans issued against real property. Ownership of a co-op apartment is not considered to be real property because buyers of co-ops technically purchase shares in a co-op corporation. Co-op owners do not possess a physical deed in the same way a buyer of a condo, house or land would receive.

Not immediately. The Mortgage Recording Tax is not generally considered to be a deductible expense when it comes to a rental property. In other words, you cannot deduct the MRT paid in the same way you would with depreciation and other costs of owning a rental property.

However, you may be able to reduce the amount of capital gains tax on a sale by including the amount of Mortgage Recording Tax you paid as part of your cost basis on the property.