Mortgage rates have seen sharp increases over the past year, more than doubling from a low of 2.5% to a new high of 7%. There is no doubt this will impact your affordability. While housing prices in New York City will moderate over time as a result of high borrowing costs, it is important to remember that only approximately 50% of NYC buyers pay cash. As a result, pricing corrections are likely to be less pronounced than in the rest of the country. If you are relying on a mortgage to finance your purchase, here are some ways to get a lower rate and save cash:
- Consider an Adjustable Rate Mortgage instead of a standard 30 year fixed loan. If you are getting a 7/6 (30 year) ARM Jumbo your interest rate will be around 5.875% for the next seven years. A standard 30 year fixed jumbo is around 6.375%. On a loan of $1 million this will save you over $3,000/year. *
- Work with banks offering lower down payments. There are banks right now which will allow you to put down 10% without paying for private mortgage insurance. If you are buying in a co-op, you will need to show that you have 12 to 24 months of mortgage payments and monthly maintenance charges in the bank after you close. A lower down payment will preserve your cash.
- Closing costs can be high in New York City. Depending on the bank you can get between $2,500-7,500 toward your closing costs. First time buyers might find they have even more advantages.
- Many banks are offering discounts on loans in Northern Manhattan neighborhoods. These rates are up to 2% off the prevailing rate. Your monthly mortgage payment will be significantly lower. The annual difference on a $1 million loan at 6% or 4% is close to $9,000 per year.
- Use a mortgage broker to compare offerings from a variety of rates. It will not cost you more money but it will help you find the best possible deal for your situation.
Learn about finding the home or getting your mortgage
If you are interested in any of these special loans, reach out to me today and I would be happy to connect you with the right banker or mortgage broker.
*prices quoted on the William Raveis mortgage website on 11.6.22