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Closing Costs – What You Need to Know

Good paperwork saves you money

Closing costs in New York City can be quite a bit of money, depending not only on what type of property you purchase but also on the amount of the purchase. Here are the four largest costs you need to be aware of if you are planning to purchase.

  1. Mortgage Recording Tax if you purchase a condo or a townhouse you will pay 1.925% of the amount of your mortgage in tax if the loan is over $500,000. If you are purchasing a co-op you will not incur this tax because you are purchasing shares in a corporation and not real property so your loan is structured differently.
  2. The Mansion Tax generates lots of eye rolling when you realize that any property priced over $1 million is subject to a 1% tax. Most properties in Manhattan priced at $1 million are one bedrooms so hardly a mansion. As the sale price goes up, the mansion tax also goes up with eight separate hurdles. The top tier rests at 3.9% of the purchase price for a luxury home over $25 million.
  3. The Flip Tax isn’t a tax you pay to the government. Instead, it is a fee imposed by a condo or a co-op board in order to shore up their reserves. Typically, this is paid by the seller but when a Board needs to get a resolution passed and faces push back by the owners, they sometimes shift the burden onto the buyer. Naturally this is something you can negotiate.
  4. Finally, should you choose to purchase in a new development there will be additional costs including paying the transfer tax which is typically only paid by the seller. This will total anywhere from 1.4% to $2.075% of your purchase price depending on the sale price of the property.

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