Time to refi

Just a note to all home owners that rates are very low and now is probably a good time to refinance. Wells Fargo's website has 30 year fixed mortgages at 5% (with 1 point).

CEMA, rates and bank closing costs

The fact that a CEMA is utilized, either in a refi or a purchase, can have an effect on the interest rate or other bank closing costs. In a residential transaction, the lender pays .25% of the mortgage recording tax. On a loan of $400,000.00, the bank has to shell out $1,000.00 which they would save on if the prior lender assigned its mortgage to your lender. Because the loan costs the bank that much less to close, they are making more money on it. This is one of the many factors that go into the bank's formula when figuring out the rate and costs to charge a borrower. Of course, they are not going to tell you this so it is your duty to bring it up.

I would tell the bank to reduce the rate slightly and once you are rebuffed (most likely) tell them to waive the application fee or processing fee. Explain to them that by doing the deal as a CEMA, they are saving on the mortgage tax that the lender pays so in essence, you are helping them out. Just my opinion, but I am pretty confident that they will waive something to make you happy and close a deal.

Mortgage tax credit - save on condo purchase

When a sponsor sells a condominium unit, a purchaser may be entitled to a credit on the NYS Mortgage Recording Tax. There is a complicated formula used to determine the amount of the credit but if the sponsor has a mortgage on the condominium (and unit) which is dated no more than 2 years prior to the sale of the unit, some credit is due to the buyer.

However, sponsors are smart. It has become common practice for the contract of sale of a condominium prepared by a sponsor to state that if any credit is due to the buyer, the buyer will pay that same amount to the sponsor. In effect, what the sponsor is saying is: "you (Buyer) were expecting to pay the full mortgage tax and I don't want to disappoint you, so, whatever you save, you pay to me". The sponsor is right in that the buyer ends up paying the same amount except that a portion is going to the sponsor rather than the State.

As we all know, the current state of the market is such that sponsors need to sell and so as a buyer, there is much more negotiating power than say, 2 years ago. So, when negotiating, give an offer that you are comfortable with but also add that any mortgage tax credit will not be paid to sponsor. This can save you thousands of dollars depending on the circumstances of your transaction.