It seems like everywhere you look during the homebuying process in New York City, you get slapped with another fee here, an extra cost there. The mortgage recording tax is just one more cost you need to account for if you’re buying a NYC property. We know that all these different costs and taxes can be hard to keep track of, so we created this guide to teach you everything you need to know about the NYC mortgage recording tax.
In this article, you’ll learn how much the mortgage recording tax is, who is responsible for paying it, and how you can cover some of the cost through a commission rebate. By the time you’re done, you’ll know more than you ever thought you’d want to know about the NYC mortgage recording tax. So without further ado, let’s get into it.
How Much is the NYC Mortgage Recording Tax?
Whenever you buy a property by taking out a mortgage in NYC, you’ll have to pay this mortgage recording tax to the New York City Register’s Office. This is true for everywhere in NYC except those on Staten Island, in which case the Richmond County Clerk will collect this tax payment. The amount you’ll need to pay is broken up into two categories based on how much the mortgage is for.
The breakdown is as follows:
- Mortgage amounts that are less than $500,000 are taxed at a rate of 1.3% by the city and an additional 0.5% by the state of New York — for a total of 1.8%.
- Mortgage amounts that $500,000 and above will owe the city of New York 1.425% and the state an additional 0.5% — for a total of 1.925%. This rate is only on the amount that’s over $500,000. The first $499,999 will be taxed at the above rate.
While that percentage might seem low when you see a number less than 2%, keep in mind that mortgages in NYC can easily run hundreds of thousands, if not millions, of dollars. A 2% tax on a million-dollar mortgage is $20,000 that has to be paid upfront. Also, keep in mind that this tax is only on the actual mortgage amount, not the property’s sale price. So the more you put down, the less you’ll need to pay because of the smaller mortgage.
Do Buyers Always Have to Pay the NYC Mortgage Recording Tax?
Unfortunately, in just about every case, the buyer will be the one that has to pay the mortgage recording tax. That’s because the buyer is the only one that’s actually responsible for the tax legally, so the liability will always fall back on them. However, there are two exceptions to this rule that are important to keep in mind while you’re searching for a home in NYC:
- Buying a co-op unit — The one true exception to the rule of paying a mortgage recording tax is purchasing a co-op unit. This is because when you buy a co-op unit in NYC, you aren’t technically buying real property. Instead, you’re buying shares in the corporation that owns the property. This means that co-ops are not real property in the eyes of the city of New York, so the mortgage recording tax does not apply.
- Getting the seller to cover it — This one isn’t really an “exception to the rule” but more or less just a potential part of negotiations. While you’re making a deal with the seller, there’s always the chance that you can get the seller to agree to cover the cost so that you don’t have to pay out of pocket.
Using a Commission Rebate to Cover the Mortgage Recording Tax
Even though you’ll almost always have to pay the mortgage recording tax (at least in most cases), there is one saving grace to keep in mind. If you are using the right agent, you can always receive a commission rebate from them that you could then use to offset the cost of the tax.
Without getting into too much detail about what it is, a commission rebate is basically a deal between your real estate agent and yourself that enables you to receive a portion of their commission once the deal is finalized. This rebate can then be applied to the tax to help cover the cost. Real estate agents will offer these rebates to draw in more clients, and then clients get to reap the benefits and get some of their money back — so it’s a win-win!