Understanding the Mortgage Recording Tax (MRT)
The Mortgage Recording Tax (MRT) is a tax imposed when a mortgage is recorded against real property, such as in New York City. This tax applies to mortgages, including home equity loans and HELOCs, and is typically calculated as a percentage of the loan amount. The MRT is paid during the closing process, when the mortgage is officially recorded.
While the MRT is an unavoidable expense for property buyers, many wonder if it can be included in closing costs or spread out over the life of the loan. The answer is yes, but there are some important details to consider.
Can MRT Be Rolled into Closing Costs?
Yes, the MRT can be rolled into closing costs, but it cannot be financed into the mortgage. Closing costs include various fees such as title insurance, attorney fees, inspection fees, and lender charges, with the MRT often grouped alongside these. This can be convenient for borrowers, as it consolidates several expenses into one payment at closing. However, unlike other costs, the MRT cannot be added to the loan balance and spread out over the mortgage term.
Why Can’t MRT Be Financed Into the Mortgage?
MRT cannot be added to the mortgage balance because it is a one-time, upfront tax that must be settled at closing. Unlike fees such as private mortgage insurance (PMI), the MRT is not considered part of the loan principal. Financing it would increase the total debt, which is why lenders require that it be paid in full during closing. This ensures the mortgage is properly recorded and avoids any tax-related issues with local authorities.
How to Handle MRT at Closing
The MRT will be included in the Closing Disclosure statement, along with other closing costs, such as:
- Title insurance
- Attorney fees
- Lender charges
- Inspection fees
- Escrow deposits
While you must pay it upfront, some lenders may offer closing cost assistance or credits to help offset the MRT. These credits may also apply to other fees like loan origination fees, potentially reducing your overall costs.
Conclusion
While the MRT can be rolled into closing costs, it must be paid at closing and cannot be financed into the mortgage itself. Be sure to discuss any available lender credits or assistance to help reduce the impact of this expense. Understanding how the MRT fits into the closing process can help you better plan your finances when buying a home.