Brian Scott Cohen explains how you could spend less when you buy a home in NYC
Don’t let Manhattan rent prices scare you away from buying in the Big Apple.
According to CNBC, the average rent in Manhattan in June of 2022, hit a record of $5,000 per month. To put that in perspective, that’s $60,000 a year just towards rent.
Even if this number changes to $4,000 per month, that’s still $48,000 a year just towards rent. Here are three reasons why you should buy, and how you could spend less when you buy.
1. Build your own equity, not your landlord’s. “Brian, what do you mean?”
When you first take a mortgage out, you own a small portion of your house. Every time you make a mortgage payment, your portion of your home equity increases. In fact, here’s a simple home equity math equation – it’s the current market value of your home minus what you owe. As you start to make home improvements and renovations, the value of your home appreciates.
2. Say goodbye to rent increases!
When you’re a homeowner, your mortgage is your mortgage – you don’t have to worry about an increase in your monthly mortgage payment. First-time homebuyers (FTHB) are typically relieved that they don’t have to hold their breath to see if their landlord is going to increase their rent or if there rent will remain the same.
Here's a rent vs. buy breakdown to show you the math:
| Rent/mo | 3 years | 10 years | 15 years | 30 years |
|---|---|---|---|---|
| $3,600 | $129,600 | $432,000 | $648,000 | $1,296,000 |
| $3,800 | $136,00 | $456,000 | $684,000 | $1,368,000 |
| $4,000 | $144,000 | $480,000 | $720,000 | $1,440,00 |
| Purchase Price | 4.00% Annual Monthly Payment (P&I) | 5.5% Annual Interest Monthly Payment (P&I) | ||
|---|---|---|---|---|
| 15 Years | 30 Years | 15 Years | 30 Years | |
| $600,000 | $3,551 | $2,292 | $3,922 | $2,725 |
| $800,000 | $4,734 | $3,055 | $5,299 | $3,634 |
| $1,000,000 | $5,918 | $3,819 | $6,537 | $4,542 |
3.Renovations and decorations.
When you’re a homeowner, you have the power to make renovations and decorate as you see fit. It doesn’t sound like a huge deal on paper, but when you start living in your space and want to paint the walls, upgrade doors, etc. you have the power to renovate. Even if there is an approval process (depending on if you are in a co-op, condo, condop), you know you can make the upgrades, if they don’t violate building codes.
When I was a FTHB, I asked myself a few basic questions, and now I will ask you:
What is your current or projected rent?
Would it be worth your investment if you sold your home in five years?
Do you want to have an asset that appreciates over time?
Circling back to my original point, that you could pay less per month when you buy.
If you’re still questioning if you can pay less, contact me to discuss.
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Equal Housing Lender, Brian Scott Cohen NMLS ID: 410025; OriginPoint LLC fka Guaranteed Rate Affinity, LLC (“OriginPoint”) NMLS 1598647; For licensing information visit nmlsconsumeraccess.org. Operating in the state of New York as OriginPoint LLC fka GR Affinity, LLC. Operating in the state of California as OriginPoint Lending LLC fka Guaranteed Rate Affinity, LLC.
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