Stamp Duty - please explain

Demetree

So - if I agree to pay the price of 130 and pay the stamp duty, with my agreed mortgage of 108 on a ltv of 90% of the valuation price of 120, is that all safe and legal?
Will my vendors have to provide receipts to my solicitor? Will my mortgage company be likely to disagree with this?

Just in case you are interested I will reply to the many comments on why I wish to purchase a house 10k over the valuation price:
The house was on the market at 138, so my offer was under the asking price. Everyone was surprised at the valuation, the EAs requested a re-valuation but they refused. My mortgage advisor said I would run the risk of a similar valuation from another lender so not worth risking it. The reason for the low valuation was that there were no similar priced properties within a 1/4 mile radius to justify the price.
This is because there are no similar properties! It was originally a 3 bed stone terrace that now has a kitchen extension, conservatory and loft conversion plus high spec fitted kitchen and bathroom. Anything else nearby is a 2 up 2 down back to back terrace. Mine also has a garden. And yes - it is hard to be level headed when the pressure is on. I am a single mum with 3 children (makes me smile when everyone keeps referring to me as 'he'). I am also a teacher and really need to move within the summer holiday, plus my landlord has served me a section 21 notice to quit as he wants to move back into my house.
AND I really like this house, and there is nothing comparable in the area that I can afford. Even at 130K this house is a bargain - so I think that price really is all about what it's worth to you.

Anyway - I am very grateful to all of you who are prepared to share your advice on this forum. It is giving me the information I need to confront the EAs and solicitors.

BazzaDP

Demetree wrote: »

So - if I agree to pay the price of 130 and pay the stamp duty, with my agreed mortgage of 108 on a ltv of 90% of the valuation price of 120, is that all safe and legal?
Will my vendors have to provide receipts to my solicitor? Will my mortgage company be likely to disagree with this?

Can't see why it wouldn't be safe and legal. Can't see why you would now need receipts. Can't see why mortgage company will have any issue with this.

Demetree

kingstreet wrote: »

You applied for an 85% mortgage of £110,500 on a property with an agreed purchase price of £130,000.

You would therefore have put down a deposit of £19,500 and paid stamp duty of £1,300.

If the property is only valued at £120,000, the lender will now lend you 85% of that, or £102,000. If you intend to continue with the transaction at £130,000 using this "fixtures and fittings plan" you will need to increase your deposit to £28,000.

The lender may have a maximum loan of 90% of the lower of purchase price or value, but that will mean a change of product and a higher rate, but may enable you to borrow £108,000 with £22,000 deposit instead.

IMHO stamp duty will remain payable unless you can evidence the true value of these fixtures and fittings to HMRC. Carpets, curtains fridges etc do not retain their value particularly well. Look on ebay for evidence of that.it?

Hello - yes that's correct. Now agreed to borrow 108 with a slightly higher interest rate. I am happy to pay stamp duty, it's just the estate agent who told me I wasn't allowed to pay more than 120K which is why she suggested the 10K fixtures and fittings. So as long as mortgage company don't mind, can I still pay 130?

Demetree

ACG wrote: »

You could have also appealed the valuation - although i do not often see these get overturned it could have been an option.

I was advised not to do this by my mortgage advisor - although with the benefits of hindsight I now suspect he was motivated by closing his deal with the mortgage lender. But who knows. It would have been a gamble, with more money spent, and the valuation could have ended up even lower.

ACG

Why did he advise against it?
I think your right, sounds like he just wanted to complete as quickly and easily as possible, sounds like between your broker and the estate agent you've really paid for this.

twig1_2

Can't see where you are coming from here. It's just agreeing to reduce the price by £1300 so the buyer doesn't really pay the stamp duty. HMRC are going to be no worse off really as they are going to get most of the stamp duty so not really using loophole . Vendor gets most of the price so not losing out on a reduction to below £125,000 which they must have been told would be a problem when fixing the price with the estate agent.
The lender will just be lending on a lower price so where's the problem there. I wasn't suggesting money in brown envelopes being exchanged in dark alleys

zzzLazyDaisy wrote: »

Because this must be declared to the lender who will view it as a 'cash back' and reduce the agreed purchase price for lending purposes by the same amount.

This also used to be a common practice once upon a time, but that loophole was closed some time ago.

kingstreet

Demetree wrote: »

as long as mortgage company don't mind, can I still pay 130?

The lender doesn't give a toss what you pay. The maximum mortgage will be 90% of the purchase price, or the value, whichever is lower.