Closing Costs for Condominium
The best way of looking at your Closing Costs for a Condominium purchase is that these costs will be divided into three different categories. The primary three (3) categories are:
- Bank Fees;
- Condominium Fees; and
It will speak for itself that should you not be financing, those fees that are attributable and payable to a Bank related to a Mortgage will not apply to those Purchasing All Cash.
Every bank will have their own set of fees. You must know them all! The following fees are generally applicable to banks.
- $ 350.00-$ 750.00.
- Application/Processing Fee: $500.00-$1,000.00
- Appraisal Fee: $300.00-$1,500.00. Please note that there may be a reappraisal fee depending upon the amount of time from when the initial appraisal took place to when the actual closing takes place or the amount of the Unit itself. This is something that will need to be discussed with your Banker. This fee applies to those who are financing.
- Credit Report Fee: $50.00-$100.00 per applicant. This applies generally to both those who are financing and those who are not financing and will be charged by both the Condominium and the Bank.
- Bank Attorney Fee $600.00-$1,000.00. This fee goes to the Bank’s Attorney. The Bank retains an attorney to prepare the necessary documents in order to close. The Bank’s Attorney actually appears at the closing. Kishner Miller needs to work directly with the Bank’s Attorney to ensure a smooth Closing.
- Origination Fee/Points. This is a fee that your bank may charge you in order to reduce your particular interest rate. While this was popular many years ago, it has become less popular in recent years due to the currently low interest rates.However, one should never be surprised and ask their Bank whether or not these particular fees apply. These fees could be anywhere from 1% to 3% of the mortgage amount. Hence, these fees could be very significant.
- Tax Escrows. This amount usually equals 2 to 6 months of the amount of real estate taxes that is attributable to the particular Condominium Unit for the fiscal year. The Bank usually escrows money for the payment of your Real Estate Taxes. In order to ensure that the Bank actually has sufficient funds to pay these particular fees, the escrow up to 2 to 6 months of your Real Estate Taxes and place them in a segregated escrow account for your benefit. While these monies are placed in escrow for your benefit, is also an additional fee that is picked up at the time of the Closing and, therefore, additional fees that you must have available at the time of the Closing. This fee applies when there is a Bank. If you are Closing “all cash” then this tax escrow will generally not apply.
- Title Insurance also known as Fee Title Insurance. The good news about Title Insurance is that it is regulated under New York State Law. However, the bad news is that it does apply and therefore must be paid at the time of the closing. There are various rate calculators that may be found that may calculate for you the precise amount of monies that are due when acquiring a Condominium unit. By way of an approximation only, for every $1 million that is being insured you pay $ 3,750.00. Again, this is only a rough approximation and this must be explored in more detail. The bottom line is that this is a significant cost that must be recognized. This is a onetime fee that is paid to the Title Company to guarantee that you have good and insurable title to the Unit.
- Mortgage Title Insurance. While Title Insurance essentially provides a guarantee that you as an Owner have a good and insurable title to the Unit free and clear of all liens, encumbrances, and judgments, Mortgage Insurance essentially guarantees to the Bank that their Mortgage has priority over any other Mortgage and/or lien against the unit. Once again, this amount is regulated. For approximation purposes only, Mortgage Insurance is approximately $ 1,250.00 for every $1 million dollars of a mortgage. Once again, due to the significant amount of the dollar value that is attributable to Mortgage Insurance this needs to be carefully analyzed. Similar to a tax escrow, you will not need to pay for Mortgage Insurance should there not be a Mortgage on the Condominium. In fact, any fee that is normally paid to the Bank as stated herein such as the Bank Fee, Appraisal Fee, Bank Attorney Fee, Origination Fee/Points will also not apply.
- Search Fees $300.00-$800.00. In order for the Title Company to prepare and issue a Title Policy the need to run various municipal searches of the various departments in New York City to ensure that there were no liens, judgments, or other encumbrances against title to the unit. In order to do this, the searches cost monies.
- Filing Fees $300.00-$800.00. These fees apply to the filing of a Deed and a Mortgage in the New York County Clerk’s Office. In order to be recognized as the official Owner of a Condominium a Deed must be filed of record. In order for a Bank to properly have its Mortgage against the Property this also must be recorded in the New York County Clerk’s Office. Once again, these tasks require that fees be paid to the Title Company.
- Short Term Interest. This is to ensure that the Bank gets paid the interest from the date of Closing until the end of the month in which the closing occurs. Once again, for example, if you were to close on the 20th the day of a particular month the bank will want to be paid from the 20th of that month until the last calendar day of the month. Once again, this is an adjustment as opposed to a Closing Cost. Either way you would have had to have paid it. However, the reason why this is being included in the Closing Cost section and a Purchaser must be cognizant of this is because, once again, this will require more money for you to have the date of the Closing.
- Common Charge Adjustment. The Condominium will want to ensure that they are being paid from the date of Closing until the end of the particular month in which you are closing. For example, if you are closing on the 15th day of any month, the Condominium will want to ensure that they are getting paid from that date until the end of the month. To look at it in the view of the Condominium, they want to ensure that there is no gap just because there is a closing. A lot of times, the Condominium will also want to pick up for the following month to ensure that they get paid. The easiest way of looking at this is to calculate into your Closing Costs is that you will need to pay two months’ worth of common charges at the Closing. Please note that this is really an adjustment as opposed to a Closing Cost. However, it is important to include as a Closing cost so that you have sufficient monies on the date of the closing.
- Mansion Tax. The Mansion tax of 1% of the Purchase Price is applicable to the purchase of any Condominium Unit in New York State in which the Purchase Price is $1 million dollars or over. As such, for example, if the Purchase Price is $2 million dollars, you will have to pay a Mansion Tax of $20,000.00. The Mansion Tax of 1% is applied to the total Purchase Price not the amount that is simply above $1 million dollars. So, if the Purchase Price is $999,000.00, then you will not need to pay a Mansion Tax. However, once the Purchase Price hits $1 million dollars the Mansion Tax applies. Additionally, you need to be very careful on whether or not you are reaching the $1 million threshold when the Purchase Price is close to $1 million dollars. If you were paying a cost that would otherwise be attributable to a Seller, for example, paying a Seller Transfer Tax, then this amount would be calculated into your Purchase Price. By way of example, if the Purchase Price is $ 990,000.00 and you have agreed with the Seller that you will be paying the New York State and New York City Transfer Tax, since the New York State and New York Transfer Taxes on $990,000.00 is over $10,000.00, you are over the $1 million dollar threshold and the Mansion Tax shall apply.
- New York State Mortgage Recording Tax. The amount of this tax is also a fixed amount. When dealing in New York City the amount is approximately for a mortgage under $500,000.00 1.8%. For a Mortgage Recording Tax of $500,000.00 or over the Mortgage Tax it is 1.925%. If the Mortgage is in another county these figures will vary. For instance in Nassau and Suffolk Counties the Mortgage tax will vary. Hence, in order to calculate this tax one must know what county they are purchasing int. For purposes of example only I we will apply here in the mortgage Tax of New York City. If a Purchaser is taking out a mortgage of $1.5 million than the Mortgage Recording Tax that will be applicable and have to be paid by that purchaser is $28,875.00. By way of another example, if a Purchaser is taking out a mortgage for $450,000.00 then the Mortgage Recording Tax is $8,100.00. The bottom line is that the Mortgage Recording Tax is indeed a fixed amount and must be recognized by a Townhouse/Brownstone Purchaser.