Financing Costs When Buying a Condo in NYC: Example with a $1,500,000 Purchase Price
If you’re purchasing a condo in New York City for $1,500,000, there are significant financing-related costs to consider when securing a mortgage. Below is a breakdown of typical expenses based on this purchase price, along with how these costs differ when purchasing a co-op or townhouse.
Financing Costs for a $1,500,000 Condo Purchase:
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Mortgage Recording Tax: For a mortgage of $1,200,000 (assuming an 80% loan-to-value ratio), the mortgage recording tax will be $23,100 (1.925%). This tax is calculated as 1.925% of the loan amount, with 0.3% covered by the lender, leaving you to pay the majority of this tax.
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Title Insurance - Mortgage Policy Premium: The mortgage policy premium for title insurance, which protects the lender’s interest, would typically be around $1,800 (0.12% of the purchase price). This ensures that the lender’s mortgage is backed by a clear title.
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Bank’s Attorney Fee: The fee for the bank’s attorney, who handles the legal work on behalf of the lender, is around $1,000 (0.067% of the purchase price).
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Loan Application Fee: When applying for a mortgage, lenders typically charge a $1,000 fee (0.067% of the purchase price) to process your application and cover administrative costs like credit checks and paperwork.
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Appraisal Fee: The appraisal fee, which ensures the condo is valued appropriately for the mortgage, is generally around $750 (0.050% of the purchase price).
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Mortgage Recording Fee: This fee for filing and recording your mortgage with the county is approximately $200 (0.013% of the purchase price).
Differences in Financing Costs for Condos, Co-ops, and Townhouses:
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Condos: As shown in the example above, a condo purchase in NYC for $1,500,000 with an 80% mortgage would result in significant financing costs, especially due to the mortgage recording tax and title insurance mortgage policy. These add thousands to your closing costs.
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Co-ops: For co-op buyers, the financing costs are lower because there’s no mortgage recording tax or title insurance mortgage policy. This is due to the nature of co-op purchases, where you are buying shares in the building’s corporation rather than real property with a deed. Co-op buyers will, however, still face loan application fees, appraisal fees, and possibly board-related fees for financing approval.
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Townhouses: Townhouse financing costs are similar to those for condos, as buyers must pay the mortgage recording tax and purchase title insurance. Additionally, townhouses often come with higher appraisal fees, as the larger property size can increase the complexity of assessing value compared to a condo unit.
Conclusion:
For a $1,500,000 condo purchase in NYC, financing-related costs such as the mortgage recording tax and title insurance mortgage policy can add a significant amount to your closing costs. Buyers of co-ops avoid many of these charges, while townhouse buyers face similar costs but may incur higher appraisal fees. Understanding these costs in advance helps you better prepare for the full scope of financing-related expenses at closing.
