Should I Refinance My Mortgage or Sell My NYC Apartment?

  Last modified on August 3rd, 2022

Whether you bought your NYC apartment a while ago or only in the last few years, the dramatic drop in mortgage rates over the past twelve months has created a huge opportunity to reduce your monthly mortgage payment.

Savings isn’t the only thing to consider though. Since the onset of Covid, many New Yorkers have been evaluating their short-term and long-term living plans, which may involve upgrading to a larger place in the city or leaving for a place in the nearby suburbs.

“It has been quite the year for NYC real estate,” says Rich Gibbons, Director of Real Estate Services for Prevu, a tech-enabled brokerage in NYC. “One of the most common questions apartment owners are asking our agents right now is: should I refinance my mortgage or sell my NYC apartment? There are clear benefits to refinancing, like savings, but there are costs to factor in as well.”

Below are a few insights to consider around costs versus timing when deciding if you should refinance or sell.

refinance mortgage NYC

The costs of refinancing a mortgage in NYC

The top benefit of refinancing your current mortgage is to lower your mortgage rate and reduce your monthly mortgage payment.

For example, if a NYC apartment owner has a $1,000,000 loan amount on a 30-yr, fixed-rate mortgage with a 3.8% mortgage rate, the monthly principal and interest payment totals $4,660. If the NYC apartment owner refinances to the same type of loan with a lower 2.8% rate, the monthly principal and interest rate payment would go down to $4,109, or a savings of $551 per month.

Over the course of a year, that monthly savings adds up to $6,612 per year.

How long are you planning to live in your apartment?

Timing matters when considering the idea of refinancing your mortgage. Saving thousands of dollars every year on your apartment as the result of lower monthly mortgage payments is an attractive opportunity, but there are refinancing costs to weigh into your decision.

On average, apartment owners refinancing their mortgage can expect closing costs of approximately 2% to 4% of the amount of the loan being refinanced depending on their borrower. On a $1,000,000 loan amount, those fees could total between $20,000 and $40,000.

This is why it is important to consider how many years you plan to live in the apartment. If you only anticipate staying one more year, $20,000 in fees to save $6,612 in mortgage payments doesn’t make sense. However, if you plan to live there for 4 years or more, the cumulative annual savings will begin to exceed the refinancing costs.

How can you get the most when selling your NYC apartment?

If you decide that it makes more sense for you to sell your apartment rather than refinance, you will have some hurdles to navigate. In the aftermath of Covid, the number of NYC apartment sales have declined dramatically year over year, and sellers have been faced with buyers seeking discounts.

While you and your agent will navigate the market to get you the best price, there is an additional way to maximize the proceeds from your sale – pay less in broker commissions. Prevu offers New York apartment owners a Smart Seller Program that saves the seller up to 3% in brokerage commissions compared to traditional agents.

Selling to buy?

Luckily, there is a new way that NYC apartment owners can save thousands of dollars when they purchase a home, and it is called a commission rebate. With a commission rebate, a buyer’s broker provides the buyer with a portion of the commission they receive for representing the buyer.

Prevu provides the largest commission rebate in the Boston area – offering homebuyers up to 2% of their purchase price. In addition, Prevu’s Smart Buyer platform allows NYC homebuyers the ability to seamlessly collaborate with their agent online.

Interested in buying an apartment in NYC? Browse listings and begin scheduling property tours today.

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