Stamp Duty Confusion

confused_tenant

Today we started on the journey of buying our first house through the 'help to buy' scheme.

We found a house we love, we have a deposit, we can afford the monthly payments comfortably and just need to get the fee's for solicitors confirmed.

We were informed that the stamp duty would be 1% which now makes the house unaffordable now, we would need to save another £1700 (on top of renting).

I know from reading these forums that people will say if you can't afford to raise the stamp duty then you shouldn't be buying which we strongly believe is NOT the case.


All we wanted to know really (in simple persons language)
1. What is stamp duty?
2. Why do we pay stamp duty?

Many many thanks in advance!

Yorkie1

The first couple of paragraphs of this webpage explain it a little:
https://www.gov.uk/stamp-duty-land-tax-rates

Stamp duty land tax is imposed by the government and is payable when you buy a house or other property, if it is valued over £125K (ignore the bit about disadvantaged areas - that has been removed).

CrispyUK

Quoted from which.co.uk

wrote:

What is stamp duty?
Stamp duty is a tax on land and property transactions. For most people, the main time you'll have to pay stamp duty is when you buy a house or apartment. Strictly speaking, you pay stamp duty land tax (SDLT), but it's commonly known as stamp duty instead.

If you're putting down a 5% deposit on the full property value and you've not reserved yet then you could try asking if the builder will include it as an incentive. You've got room for a 1% cash incentive according to the Halifax criteria.

shortchanged_2

Why don't you see if you can get the property for £1700 less? There we are, problem solved.

bigadaj

If you didn't know you had to pay stamp duty then that's a possible reason for not buying, do some research and thinking before spending several times your yearly income, or at least that of a lender for which you are responsible. If £1700 is a major problem then yes you should be considering whether house ownership is for you rather tha renting, there are other costs in owning rather tha. Renting above paying a mortgage.

Thrugelmir

confused_tenant wrote: »

I know from reading these forums that people will say if you can't afford to raise the stamp duty then you shouldn't be buying which we strongly believe is NOT the case.

Not at all. Stamp duty is nothing new. So people allow for this when calculating their finances. Its just another cost in the purchase process.

jb66

its hard to rent and save a deposit. good luck

buglawton

With your first home at least your 1% buys something - you very first non-renting situation. Think of existing homeowners who need to move because of job, elderly relatives, more kids... Typically have to pay 3% or say, £10k.