tl;dr

• I cumulatively managed to save $99,724 through a few tricks when purchasing my apartment:
  • $49,000: Negotiation the apartment price itself
  • $23,574: Reducing my interest rate by shopping around, negotiating, and transferring assets to get rate discounts
  • $17,000: Finding a broker that was willing to split their commission with me
  • $6,972: Taking a loan against my assets to avoid selling stocks for the down payment
  • $2,378: Using my work legal plan to get a lawyer for free
  • $800: Getting an account transfer bonus

Intro

Every purchase is an opportunity to find clever ways to save money, and the bigger the purchase the bigger the opportunity. Buying a home is the single biggest purchase most people will make in their lives, so it’s worth spending some time optimizing every step of the process to save as much as possible. Below are all the ways I found to save money in the home buying process.

$49,000 – Sale Price Negotiation

Sometimes the easiest way to save money is to just ask. My apartment was originally listed at $899,000, and we offered $810,000. They countered with $875,000, and we responded with $825,000. They countered again with $860,000, and we responded with $845,000. They claimed to have another higher offer, and we responded that $850,000 was our best and final offer, which they accepted. What amounted to minutes of emailing and texting (and days of nervous waiting) ended up saving me $49,000, which is probably the highest hourly return I’ll ever see!

$23,574 – Mortgage Rate Tricks

The first bank I went to was TD, and I was offered a 30 year fixed rate¹ of 3%. In the end, I managed to get a 30 year fixed rate of 2.375% from Citi². I had to borrow $595,000 for the purchase (the co-op required 30% down), meaning that over the life of the loan I’d pay $308,076 at 3% vs $237,493 at 2.375%. That’s a total of $70,581 in savings.

There are two mitigating factors, however:

1. Mortgage interest is tax deductible, so while I would pay $71,133 more in interest over 30 years, I’d get to use those payments to lower my taxable income in each of those years³.
2. The time value of money means that future money is worth less than present money, so the value of savings that stretch 30 yeas into the future have to be adjusted downwards.

Using these mitigations, and assumptions of 2% inflation, an investment return of 4% above inflation, and a 37%/6.85%/3.88% federal/state/city marginal tax rate, I did a bunch of math in this spreadsheet to guestimate the present value of my $70,581 in savings to be $23,574

Next, I’ll go into how I got from 3% to 2.375%:

Credit Score

Your credit score influences the mortgage rates you’re offered. I can’t quantify how much my credit score saved me, but I made sure to boost my score as much as possible by keeping all my credit card balances at zero (even if you pay on time, many credit cards will report a balance to your credit report) and not applying for any non-mortgage credit during the time I tried to buy a house.

Rate Shopping

Looking around and getting quotes from multiple lenders helped me get from TD’s 3% to 2.875% at Citi, accounting for 20% of my total savings.

Negotiation

Lenders will compete for business, and they will offer you better rates if you have a better offer from another lender. Sometimes all they need as evidence of a better offer is a screenshot of an email, other times they need a Lender’s Estimate (official form you get when you get an offer). Both might be easy for a moderately unscrupulous person to fake…

Through my negotiations, I was able to get Citi down to a rate of 2.625%, conditional on bringing $50,000 in assets to the bank. This accounted for 40% of my total savings.

Relationship Pricing

Most mortgage lenders offer relationship pricing, where they give you a discount on your mortgage rate based on the amount of assets you have at (or promise to bring to) the bank. Citi has particularly generous relationship pricing tiers, with a few quirks:

1. If you bring more money to Citi than you committed to (note the $50k commitment I mentioned in the previous section), they will automatically adjust your mortgage rate down to reflect the better relationship discount. In my case, the 2.625% rate I negotiated was allegedly the best possible rate Citi could give, but then “surprising” them by bringing more assets than expected triggered the system to automatically apply the higher discount to give me an even lower rate. Note: This is something my broker informed me would happen, and not necessarily something you should count on when apply for your own mortgage.
2. Unlike most banks Citi allows you to count tax advantaged retirement accounts (i.e. IRA / Roth IRA) against your relationship tier. I just so happened to have a Roth IRA I could transfer, as well as an old employer 401k that I was able to transfer. These accounts combined helped me get over the threshold for the next rate discount. Note: I had to make sure that before the end of the year I rolled my old employer’s 401k out of my newly created Roth IRA into my current employer’s 401k in order to avoid having the Pro Rata Rule cause taxes on my backdoor Roth IRA contributions. Make sure you understand the Pro Rata Rule before attempting this.

Combining these two tricks got me another 0.25% off, resulting in the final rate of 2.375% and accounting for the final 40% of my mortgage rate savings.

$800 – Citi Account Transfer Bonus

To achieve the mortgage rates mentioned in the previous section, I had to transfer my assets to Citi, so I decided to double dip and get bonuses for opening the accounts I was required to open. At the time I made $300 for opening the checking account and depositing $15,000, as well as $500 for opening the investment account and transferring in over $200,000 in stock. The $300 checking offer is still live and the investment account offer now appears to be $1,000.

$17,000 – Buyers Rebate

When buying a house, the norm is for the seller to pay both their and your agent a commission. Rates vary, but it’s common for the seller to pay 3% of the sale price to each. There are some agents that are willing to split the commission with you.

For my purchase, I used a service to called HausIt (not a referral link; I don’t earn any commission) to find an agent that would only take a 1% commission and give me the rest. The apartment I purchased had a full 3% commission, so I ended up with a 2% kickback on the $850,000 sale price, for a savings of $17,000⁴.

It’s possible you might get a less experienced agent this way, and you’ll probably be expected to do a bit more work (e.g. looking through listings yourself and sending them to your agent). Personally, I wasn’t super impressed with my agent, but in the end I got a place I liked and I don’t think there were any major issues with the agent I got. That said, I’ve only ever purchased this one apartment, so I don’t know how the experience with a full service agent would compare.

$2,378 – Corporate Legal Plan

You need an attorney during the purchase process (at least in NYC). StreetEasy estimates the cost of an attorney at $2,500 – $5,000. I used my company’s legal plan benefit (MetLife Legal) to get a closing attorney for free. The plan requires I be a part of it for the full year, and had a biweekly paycheck deduction that added up to $122 by the end of the year. So this worked out to a conservative $2,378 savings.

Note that these benefits can only be enrolled in during the open enrollment period, so if you plan to take advantage of your company’s legal benefit you’ll need to plan ahead.

$6,972 – Non-Purpose Loan to Avoid Capital Gains

The Cost of Capital Gains

The apartment I bought required a $255,000⁵ down payment. I had $90,000 from some money I’d kept in cash, and some stock I was willing to sell because it had negligible capital gains. For the remaining $165,000 I calculated that selling my least-appreciated stocks would still incur $13,263 in capital gains.

Avoiding that $13,263 in capital gains isn’t pure profit, because I will still have to pay capital gains whenever I sell them down the line. That said, there are still benefits to deferring the realization of capital gains:

1. I can earn returns on that $13,263 (in the form of dividends or stock appreciation) until the point at which I sell it.
2. If i wait to sell the stock until after I retire, it will likely be at a lower tax rate⁶.

I don’t plan to touch these stocks until I’m retired, so I estimated that I would leave that $13,263 invested for 30 years. Assuming a reasonable 4% return, that would be $43,017 in 30 years. Subtracting the original $13,263 that would be owed when I finally sell the stock get us $29,754 additional gains. Applying a 15%/6.85%/3.88% federal/state/city capital gains tax rate (which I assume is an upper bound, rather than lower bound) on those additional gains would further reduce them to $22,098. Finally, following the same time value of money logic as above and using the same 4% return estimate, that $22,098 becomes $6,813 in today’s dollars.

Non-Purpose Loan / Pledged Asset Line

To avoid selling my stocks, I instead took the $165,000 I needed out as loan against my stocks. Most financial institutions offer a loan product like this. At Citi the loan product was called a Pledged Asset Line (PAL), and I’ve also heard it called a Non-Purpose Loan. I made the initial withdrawal in April, and paid it off by December. The total interest I paid in that time was $1,674.

I minimized this interest in two different ways:

1. Negotiating! The advertised rate was 4.75%, but I was able to talk them down to 3% by reaching out to my adviser at the bank and sharing that I’d found cheaper rates elsewhere. Without negotiating, the loan would have cost me another $976.
2. Using a 0% Credit Card. I opened a new credit card with chase that had an 18-month 0% interest promotion. I then transferred my credit limit from all my other chase cards to that one, to get a $43,800 credit limit that was basically a 1.5 year interest-free loan. I then put all my living expenses on that card so that I could funnel every cent I had into paying down the PAL. By the time I had paid off the PAL, I had pretty much maxed out that card. Multiplying the monthly balances on that card by the 0.25% monthly rate (i.e. 3% / 12) that I would have paid if those balances were in my PAL, I calculate I saved $439 of PAL interest by using this trick.
   
   At the point I paid off my PAL, I had $43,000 of debt on my 0% credit card. Had that money been in my PAL, it would have taken until my next stock vest (two months) to pay off that $43,000. At the 0.25% monthly rate, that adds up to an additional $215 saved for a total of $654
   
   I opted to pay additional fees to put some traditionally cash- / check-only expenses (maintenance payments and contractor payments) on this 0% credit card. I used a service called Plastiq, which charges your credit card and then mails a physical check. The fees amounted to $171, which means the overall savings from using a 0% card offer were reduced to $483. In the end, the savings were fairly negligible, it was a decent amount of work to manage, and the extra debt temporarily tanked my credit score. While it was fun to optimize, I don’t actually recommend most people try the 0% card trick.

The Value of Staying in the Market

In addition to avoiding paying capital gains, my PAL let me keep my money invested in the stock market. Between April and December, my portfolio appreciated 2.54%, meaning that I earned $4,191 on that $165,000 of stock I didn’t sell. Now, we have to consider the alternative scenario where I had sold the stock to make the down payment instead. In that scenario, I wouldn’t have had any loans to pay down, so I would have been able to plow that $165,000 into my investments rather than paying off my PAL. Making the assumptions that the $165,000 would have been invested in even increments every month and that the 2.54% was evenly distributed across all the months, I would have made $2,357 in this alternative scenario. Thus, the incremental value of staying invested was $4,191 – $2,357 = $1,833

Net Savings

Subtracting the $1,674 interest from the $6,813 in savings and $1,833 in additional gains means the PAL saved me $6,972.

$??? – Cost Basis Tracking

Home improvements increase your cost basis in your house, meaning they can reduce the capital gains taxes you pay on a sale. I won’t attempt to calculate the current savings I’ve made from tracking my home improvement costs, but I will say I’m tracking them for the chance at future tax savings down the line.

Conclusion

Across all these techniques, I saved $99,724 on my apartment purchase. Most of the techniques were reasonable effort and high reward, so I’d recommend them to anyone. The one exception is the Non-Purpose Loan / Pledged Asset Line tricks that ended up not saving that much and requiring a lot of uncertain accounting. I’m happy I did it, because I enjoy the challenge of optimizing my finances, but it’s probably not for most people.

1. Mortgages are available at different term lengths and in fixed and variable rate configurations. Given that I was buying at a time of historically low interest rates, it was a no brainer to me to go for a fixed rate at as long a term as possible. The 2.375% rate I got is barely above the Fed’s inflation target (and below the inflation we’ve experienced in 2022 / 2023), so there’s no reason for me not to keep that loan as long as possible and invest my money elsewhere earning more money. When buying in a higher interest rate environment the calculus might shift. ↩︎
2. Note that mortgages have a concept of “points” where you can pay money up front to lower your rate further. I did receive offers with points, but I chose not to take them. ↩︎
3. An extra little twist is that deducting mortgage interest requires me to itemize my taxes, which is something I wouldn’t do. Itemizing means I give up using the standard deduction ($12,950 for 2022), and due to the SALT cap ($10,000 in 2022) the first $2,950 dollars of mortgage interest I deduct is just getting me back to what I would have saved had I not done itemized deductions. This is something I had to account for in the spreadsheet I shared. ↩︎
4. HausIt claims this rebate isn’t taxable, since it’s effectively just a discount on your purchase (and in fact they say you can instead request to modify the purchase contract to just have the seller reduce the commission and purchase price by 2% if you really want). I don’t know how well tested that theory is, but I didn’t get a tax form and didn’t get audited when I submitted my taxes. ↩︎
5. A 20% down payment is standard, but unfortunately many NYC co-ops require a higher 25% or 30% down payment. ↩︎
6. Long-term capital gains are taxed at a preferable non-income tax rate at the federal level, but this rate still has tiers based on income. Additionally, states such as New York just tax capital gains as regular income. ↩︎