There has been a notable shift in real estate markets as mortgage rates have begun to rise this year, and apartment hunters in New York are beginning to feel it.
Buying an apartment in New York City is an adventure in any market condition. But as rent prices soar beyond pre-pandemic levels and mortgage rates rise, buyers face a unique dilemma: play it safe or take the plunge.
Though rising rates create a headwind for some buyers, they are not necessarily insurmountable. That is why the team from Prevu has compiled the following tips for savvy buyers to navigate the current market successfully.
Seize the opportunity
Competition to purchase in New York City is starting to ease. As a result, buyers are seeing an opening to secure listings that would have been swarmed with offers several months ago.
As mortgage rates have moved higher in 2022, some buyers are putting their search on hold, and this creates an opportunity for those still searching to have a better chance to purchase the one.
Slow competition doesn’t mean you are the only buyer though, so don’t sleep on an offer. If you see a listing that ticks all the boxes, act quickly.
Save with a commission rebate
No matter the state of the market, the large down payments and closing costs required in NYC never fail to make affordability feel like a hurdle. Therefore, finding ways to save when buying an apartment should be your top priority, and the easiest way to do this is to secure a commission rebate.
Sometimes referred to as a buyer rebate, a commission rebate occurs when your buyer’s agent gives you a portion of the commission they receive for representing you. Traditional brokerages don’t usually offer rebates, so it is crucial to ask your buyer’s agent if they provide one before you choose to work with them.
Prevu offers the largest commission rebate in New York City, with buyers receiving up to 2% of their purchase price via the company’s Smart Buyer Rebate. For example, if you buy a $1,900,000 coop on the Upper West Side with Prevu, you could receive up to $38,000 cash back after closing.
These savings are a welcome prospect for buyers and can offset closing costs or help you furnish that new apartment.
Explore which mortgage types work for you
Rising rates can restrict the amount of money a buyer can borrow for an apartment purchase, but finding a mortgage option that will fit your monthly payment needs may still be possible.
The first step is to be clear on what you are buying. If you don’t anticipate living in a place for more than five or seven years, you may want to consider an adjustable-rate mortgage (ARM).
ARMs typically offer lower mortgage rates compared to 30-year fixed-rate mortgages, however that lower mortgage rate on an ARM is only fixed for a set number of years and can fluctuate in the future. Therefore, buyers purchasing with a shorter ownership time horizon can achieve a lower monthly mortgage payment.
Conversely, apartment buyers searching for their forever home should focus on their credit score and down payments. It may make sense to settle on a traditional 30-year, fixed-rate mortgage, and the higher your score and larger your down payment, the better your chance of achieving your desired monthly mortgage payment.
Consider paying mortgage points
Another great way to combat rising rates is paying mortgage points.
Mortgage points are lender fees you can pay to lower the interest rate on a loan. Each point usually costs a buyer 1% of the entire loan amount, and can lower the mortgage rate by 12.5 to 25 basis points. For example, securing a $1,200,000 loan will mean an upfront cost of $12,000 for the point at closing, however the savings from the lowered rate can be a multiple of that over the life of a 30-year loan.
Mortgage points can be an excellent choice for NYC apartment buyers looking to save on long-term homes or investment properties.
Search for new developments open to negotiating
When buyer competition is high, NYC developers rarely offer any incentives, and buyers are forced to pay full price plus the extra closing costs that come with new construction. However, with the recent lull in buyer demand due to higher mortgage rates, some developers are showing signs that they are willing to negotiate again on their newly-constructed units.
That doesn’t mean you’ll get a break on the listing price per se, but you may get the developer to kick in some extras.
Speak with your buyer’s agent to see if there are new buildings within your search criteria that are willing to sweeten the deal. Some new developments are offering incentives again – ranging from free years of common charges, free storage units, or concessions to cover closing costs like transfer taxes or other fees.
Interested in buying an apartment in NYC?
Browse listings and see how much you can save with Prevu’s Smart Buyer Rebate.