What are Closing Costs?
Closing costs are an unavoidable expense associated with the purchase of property. They’re comprised of two categories: bank/mortgage-related expenses and title-related expenses. Title insurance is just one of the costs of closing a purchase.
BANK/MORTGAGE-RELATED EXPENSES: These are the costs incurred in obtaining the mortgage to purchase your property. For an explanation of bank-related expenses please speak to your lender.
TITLE-RELATED EXPENSES: These expenses are typically incurred to complete the transfer of title and to record the necessary documents associated with the closing. They include:
- Title Insurance: Title insurance is comprised of a few parts: the title report, the title Owner’s insurance policy, and the lender’s title policy with standard endorsements
- Title Company Searches and Service Fees: These include additional searches and services performed in conjunction with issuing a title report or policy, such municipal searches, Patriot name searches, bankruptcy searches, survey expenses, taxes and escrow/courier fees.
- Recording Fees: To record a document in the State of New York, the original fully-executed documents must be submitted to the County Clerk for recording, the fee for which varies by each county and document type. Examples of standard documents to be recorded by a buyer in association with a home purchase include the deed and mortgage agreement.
- Mortgage Recording Tax: For purchases with a mortgage, a one-time mortgage recording tax is assessed against the home buyer, which will vary by county and mortgage amount.
In New York State, the mortgage tax is 1% of the total mortgage amount, of which the buyer will pay 75% and the lending bank pays 25% in most cases.
- Transfer Tax: New York State imposes a real estate transfer tax on conveyances of real property when the consideration exceeds $500. The tax is computed at a rate of $2.00 for each $500 and is generally paid by the seller using form TP-584.
- Mansion Tax: New York State imposes a real estate transfer tax on conveyances of real property valued over $500, which in most transactions is paid by the seller. However, for home purchases with a sale price of $1,000,000 or more, New York State imposes an additional transfer tax of 1% of the sale price to be paid by the purchaser.