The Mortgage Recording Tax Most Long Island Buyers Never See Coming
*If you are financing a home on Long Island, this one line item can be your single biggest closing cost, bigger than your attorney fee and often bigger than title insurance.*
Most buyers spend weeks worrying about down payment and inspection costs. Then they get their closing disclosure and see a tax they never budgeted for. New York State charges a tax on the privilege of recording a mortgage on real property, and Nassau and Suffolk counties both fall inside the district where the higher rate applies.
How the math actually works
The state tax itself is not one number. It stacks several pieces together: a basic tax of 50 cents per $100 of mortgage debt, a special additional tax of 25 cents per $100, and an additional tax of 25 cents per $100. That additional tax climbs to 30 cents per $100 in counties inside the Metropolitan Commuter Transportation District, which includes Nassau and Suffolk.
For a one or two family home, there is some relief built in. The state deducts the first $10,000 of principal debt when computing the additional tax. It is not a huge break, but it is real money back in your pocket on smaller loans.
Once you add up the state pieces plus the local Nassau County rate, the combined bite lands close to $1.05 per $100 of the mortgage amount for loans recorded in Nassau County, based on the rate table the state published when the additional tax was last increased. On a $500,000 mortgage that is roughly $5,250 before you even get to your attorney, your inspector, or your title company.
Who actually pays it, and when it does not apply
The buyer owes this tax, not the seller. Because it is tied to the loan itself, only buyers taking out a mortgage pay it, while cash buyers are exempt. Co-op purchases skip it entirely too, since a co-op is a share in a corporation rather than real property, though that matters more in the city than out here where co-ops are rare.
Your lender also chips in a small piece. Under state law, part of the additional tax is paid by the lender, generally 0.25 percent of the loan, so the number on your closing disclosure already reflects that offset.
If you refinance down the road, brace yourself. You will pay this tax again on the new mortgage amount, though New York does allow a partial exemption in certain refinance situations, particularly when you stick with the same lender or use a consolidation agreement. That exemption process has real paperwork behind it, so bring it up with your attorney well before your refinance closes rather than after.
Combined with title insurance, attorney fees, and transfer taxes, this is one reason New York ranks second nationally for total closing costs, with buyers here paying well above the national average. Knowing the mortgage recording tax is coming, and roughly how big it will be, means one less surprise at the closing table.
If you are staring down a purchase and want to know what your specific number will look like, ask me directly at /askmuds. And if you are just curious what all this means for your own house right now, you can always check your home value.