How to Calculate Closing Costs in NYC: A Guide For Buyers

Find out how to calculate your potential closing costs when purchasing a home in New York, and what you can do to lower some of the expenses & taxes.

While the already expensive cost of buying a condo or co-op in NYC makes it hard enough to afford to live in NYC, there are other fees that you will need to deal with during the closing that you may not have even thought of or budgeted for.

Since these additional fees may be a game-changer when it comes to buying a place in NYC, it is important to understand what these extra costs are as well as what they are for, so that you can be better prepared when it comes to buying your dream home.

Closing Costs in New York

  • Besides being responsible for your down payment at the closing table, the buyer is responsible for a number of other fees and costs.
  • Closing costs are typically higher with mortgage financed purchases than with all-cash purchases.
  • You should designate about and extra 2-4% of the sales price for closing costs.
  • Costs can include lender fees, appraisals, inspection, attorney, credit check, title search, title insurance, homeowner's insurance, transfer taxes (in some cases), mansion tax (if over $1 mil.), prepaid property taxes, prepaid interest, and mortgage or discount points.
  • Aside from sales price negotiation, closing costs are also another feature you can negotiate on.
  • Doing research on a good mortgage lender can help you save as closing costs differ from lender to lender.

What Closing Costs Does the Buyer Pay For?

The buyer's closing costs are all the taxes and associated fees that you are required to pay for your purchase.

Some of the expenses are similar to the seller's closing costs and some of them are completely different.

These fees and expenses become higher with home purchases that require financing because of all the closing fees associated with mortgages.

When it comes to putting extra money aside for your closing costs, it is generally recommended to set aside approximately 2-4% of the sales price of the co-op, condo, or townhouse you purchased.

If the co-op or townhouse costs over a million dollars or you’re buying a condo, you will want to save even more - about 3-4% of the purchase price.

If that condo you bought is brand new, bump that number to 5% of what you paid for it.

Many of the associated buyer's closing costs may include some or all of the following:

  • Lender fees to process and finalize your loan
  • Appraisal fees
  • Inspection fees
  • Credit search charges
  • Title search charges
  • Real estate attorney fees for closing
  • Transfer taxes (sometimes)
  • Prepaid property taxes
  • Prepaid taxes
  • Prepaid interest
  • Homeowner’s insurance

How Much Are the Bank Fees?

If you plan on taking out a mortgage, know that you will be paying close to $2,000-$3,000 in bank fees, including your bank attorney’s fees and an appraisal.

Read on: How to Choose a Mortgage Lender in New York.

How Much Are Attorney’s Fees?

Attorney fees typically cost $1,500-$4,000 for the transaction, but usually do not charge an hourly rate.

This can be beneficial to the buyer as they can feel free to ask their lawyer questions about a future purchase without having to worry about paying by the hour.

A good attorney is important as they can be greatly beneficial, so if your budget allows, splurge a little bit in this area.

You also want to make sure that you find someone who specializes in New York City real estate closings.

Keep in mind that you will only need to pay if the deal closes, and in some cases, you may have to also pay for the bank’s attorney, which could set you back an additional $1,000.

In addition, when purchasing in a new development, be aware that the developer will typically pass their attorney fees onto the buyer, just because they can.

Find out more about real estate lawyers by reading Why You Need an Attorney for a New York Real Estate Purchase.

You Might Need to Pay a Mansion Tax

The NYC Mansion tax, also considered to be a kind of transfer tax, is paid by the purchaser on properties starting at or greater than $1,000,000.

This mansion tax is based on sales price alone, regardless of how big your actual property may be.

The tax amount differs on a scale of 1%-3.9% of properties based on what was paid for the purchase price.

The maximum percentage of 3.9% is for properties that sold at $25,000,000 or more.

If you happen to have your eyes set on an apartment just over the $1,000,000 threshold, you are able to meet the limit with a commission rebate, since it is treated as a reduction to the sales price,

Are Buyers Responsible for the Transfer Tax?

The transfer tax is not typically paid for by the buyer. The exception is with a unit in a new development.

When buying a brand new condo or a co-op directly from the developer (also known as a sponsor), expect to pay a New York City transfer tax of 1% of the sales price on purchases greater than $500,000.

In addition to the New York City transfer tax, you will also be required to pay a .4% transfer tax to New York State.

For purchases of $500,000 or less, there is a 1.425% transfer tax.

To learn more about buying at a new development, read Buying a home in a New York City New Development vs Old: Which is Better?

When Do You Need to Pay a Flip Tax?

Those who live in a co-op are required to pay a flip tax when they sell, which can be larger than the transfer tax.

The amount of a flip tax can vary anywhere from $500 to 15% or more of the purchase price.

After the sale, you will be required to pay the board a certain amount based on a percentage of the sales price or a determined amount per share if in a co-op.

Flip taxes were first used as a way to decrease the amount of buyers who were purchasing apartments with the sole intention to sell it shortly after in order to make a profit.

Today, however, the main point of flip taxes is to raise a stream of revenue for co-op buildings instead of increasing their maintenance costs.

This is not normally a tax that is on the onus of the buyer.

But it's good for buyers to be aware of this closing cost just in case a seller at a co-op tries to include this tax in negotiations.

Remember to Factor in Building Fees

Most condo and co-op buildings charge fees for moving in and moving out (varies from several hundred dollars to several thousand dollars for each), as well as a managing agent and co-op attorney fee, (from $1,500 and up) and board application fees ($500-$700).

If purchasing a new condo, you may be responsible for helping to pay for the super’s apartment and possibly for part of the building’s insurance costs for the initial year.

Once you apply for the purchase, you should receive a list from the board of what is needed, as well as any associated fees. If you have not received it, be sure to inquire as this can be very helpful to the buyer.

Title Insurance Isn't Free

If you have decided on buying a condo in NYC and will be taking out a mortgage, title insurance may be a closing requirement for you.

This requirement, however, will not apply to co-ops due to the individual shareholder setup.

If buying a co-op, you can simply do a search on the property to see if there are any liens or open permit issues that need to be resolved.

Some buyers finance in order to buy the property. If this is you then your lender will also need title insurance.

It is also important to keep in mind that if you refinance, you will need to buy title insurance again as your new lender will need the same sense of security.

The cost of title insurance depends on the provider, but an approximate cost is 0.45% of the purchase price.

Title insurance covers the buyer if they suddenly find out after closing the deal that there are outstanding liens or any other legal issues from former owners or open/unpaid permits.

Should any issues or liens be discovered after the closing, the title insurance company will take on the financial burden as well as the responsibility of solving these discrepancies.

Mortgage Recording Tax Always Comes With a Mortgage

Also known as MRT, this is considered to be the largest buyer closing cost in New York City.

Keep in mind that Mortgage Recording Tax does not apply to co-op buildings.

The MRT requires payment of 1.8% for loans less than $500k and 1.925% for loans greater than $500k.

How much MRT you pay depends on the size of your loan, unlike most of the other costs and fees that usually depend on the price of purchase.

Mortgage Recording Tax Rates For NYC

Initial Loan Balance Property Type Total Tax Lender Pays Buyer Pays
Under $500,000 All 2.05% 0.25% 1.80%
$500,000 or more Condos & 1-3 Family Houses 2.175% 0.25% 1.925%
$500,000 or more Other Property Types 2.80% 0.00% 2.80%

New York State & New York City Transfer Taxes

When buying a new development in NYC, you will be expected to pay for New York State and City transfer taxes.

Sometimes negotiable with the developer, the New York City Real Property Transfer Tax is 1% of the price if the value is $500,000 or less, and is 1.425% if more.

Aside from paying New York City taxes, you will also need to pay a New York State transfer tax, which is an additional 0.40% transfer tax on the sales price.

For residential purchases more than $3,000,000, the New York State transfer tax jumps to 0.65%.

The buyer having to pay for transfer taxes is not a set-in-stone rule, but the real estate market has typically been good to developers.

Units in new developments are usually in high demand and desirable, as these condos tend to be brand new, modern with luxury finishes.

So, developers have had their pick and could pass the transfer taxes onto the buyer.

However, in a slower market, it may be possible to negotiate for the transfer taxes.

Read on: What is the Transfer Taxes in NYC and NYS Real Estate Purchases?

NYC and NYS Property Transfer Taxes

Property Sale Price NY State Transfer Tax NYC Transfer Tax Total Transfer Tax
$499,999 and less 0.40% 1.00% 1.40%
$500,000 - $1,999,999 0.40% 1.425% 1.825%
$2,000,000 - $2,999,999 0.40% 1.425% 1.825%
$3,000,000 - $4,999,999 0.65% 1.425% 2.075%
$5,000,000 - $9,999,999 0.65% 1.425% 2.075%
$10,000,000 - $14,999,999 0.65% 1.425% 2.075%
$15,000,000 - $19,999,999 0.65% 1.425% 2.075%
$20,000,000 - $24,999,999 0.65% 1.425% 2.075%
$25,000,000 or more 0.65% 1.425% 2.075%

Miscellaneous Costs

In addition to the above costs, you may see extra costs added in during the closing such as: mortgage fees, appraisals, surveys, move-in deposits, application fees, recording expenses, incidentals, and more.

Another cost to look out for is if you want to lower your interest rate, you can prepay for "points".

Each point equals 1 percent of the total mortgage and should be paid at the closing table.

You should know that some of the mortgage fees may be negotiable, so it is a good idea to check with your bank to see if they will help chip in.

How To Offset Closing Costs in NYC

With all of the associated fees that come with purchasing a piece of property in NYC, it may make you question if this is even worth it.

However, there are certain ways that buyers can help offset their closing costs when it comes to purchasing in NYC.

Where Can Your Easily Save on Costs When Buying a Home

The first place to look when cutting costs is by who you hire and use.

You should shop around when looking for an attorney or inspector. Those are savings that you can find right away by using vendors with lower rates.

While many lenders have a list of appraisers they refer to, you can ask them if you can find your own licensed appraiser for the appraisal.

Likewise, you are free to find your own homeowner's insurance and title insurance.

These are all opportunities to find the best rates and save on your out-of-pocket expenses.

Negotiating on Closing Costs

First off, an overabundance of high-end NYC apartments means that there is a greater chance that developers/sponsors are willing to cover your transfer tax, attorney fees, and other random costs.

If you can’t get these for free, you still have a shot at being able to negotiate the prices/terms.

Check with an attorney or tax professional to see if you are able to work a settlement with the seller to keep the purchase under $1 million.

It is important to know that there may be risks involved if you wind up getting audited.

Do Your Research When Picking a Mortgage Lender

Different loan companies will occasionally compete in order to get the best business.

This means that there is a good chance that they will offer to cover numerous charges such as the credit check or UCC filing fee, which can save up to approximately $100.

Purchase Consolidation Extension and Modification Agreement

If you happen to be taking out a mortgage while your seller is still paying off their own mortgage, you can ask your attorney if you should purchase CEMA, otherwise known as a Consolidation Extension and Modification Agreement.

The end result could wind up as savings on your mortgage tax with an amount as much as 1.925% of the seller or buyer’s mortgage amount - dependent on whichever is lower.

One bonus of purchasing a CEMA loan is that you only pay taxes on the difference between the seller’s loan and the buyer’s new loan amount.

Closing Credit

Fees Associated With NYC Real Estate Closing Costs
Buyer’s Attorney $1,500-$2,500
Bank Fees $2,000-$3,000
Application Fee $350
Processing Fee $330
Appraisal Fee $300-$1500
Credit Report Fee $10.10 single/$15.20 joint
Bank Attorney $650 - $750
Tax Escrows 2 to 6 months
Recording Fees $250 - $750
Fee Title Insurance Inquire with your real estate attorney
Mortgage Title Insurance Inquire with your real estate attorney

Developers who are selling new condos are more likely to negotiate due to the lack of wiggle room on the price of the property itself.

The developer or sponsor may offer a closing credit, or otherwise known as a sum that is given back to the buyer at closing.

Question the Loan Estimate

Once you receive your loan estimate, be sure to carefully inspect every line item with the lender, being sure to question what each fee covers as well as a reason for the cost.

Don’t be afraid to also question any redundant sounding fees such as processing fees and underwriting fees.

Slow Down Your Closing

You can help lessen charges by postponing your closing until the end of the month.

By scheduling your closing ahead of time, you could potentially save by having to pay less money upfront.

The Takeaway on Closing Costs

Before you buy your stake in NYC property, make sure to do your research to make sure that you are receiving the best deals as well as to ensure that you are fully prepared for any ‘hidden” costs that may lie ahead.

Don’t be afraid to consult your attorney as there are no hourly fees associated and payment is not required unless the property goes into the closing.

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Jackie Maroney
About the author

Jackie Maroney is a writer for PropertyNest and works in real estate and property management. She currently resides in Long Island City.