Gap Mortgage
(NY)

Summary

This gap mortgage template may be used by a lender that is consolidating an existing mortgage loan with a new mortgage loan under New York law. This template includes practical guidance and drafting notes. An assignment of mortgage is executed by the existing lender to transfer the existing note and mortgage to the new lender and the gap mortgage is executed to secure the new indebtedness. The parties then enter into a consolidation, extension, and modification agreement consolidating the existing mortgage with the gap mortgage to form a single consolidated mortgage to secure the new loan. The gap mortgage is typically pro forma and does not contain all the provisions that are customarily found in a mortgage, provided a New York gap mortgage typically contains the clauses of a short form mortgage pursuant to N.Y. Real Prop. Law § 258. Loans are often structured this way in New York because the state's substantial mortgage recording tax is payable only on new indebtedness. This loan structure can be used in a commercial or residential loan transaction. For more information on consolidating notes and mortgages in New York, see Mortgage Consolidations: Minimizing Mortgage Taxes (NY). This gap mortgage template contains terms that are pro-lender. Capitalized terms used in this template should be conformed to the related loan documents. For more information on real estate financing in New York, see Commercial Real Estate Financing (NY).