Loan for stamp duty

Idiophreak

Hi All,

Before anyone says it, I *have* searched the forum and tried to find an answer, but can't find a definitive answer to this one...

Are you legally *allowed* to borrow money for stamp duty?

I'm not asking if it's a good idea...I well understand the reasons people think it's a bad idea.

I'd borrow the money from family, so wouldn't get a hit on my credit record.

In terms of affordability, I could service the loan just fine...so declaring it for the mortgage is not a problem.

I know that you have to declare the source of your deposit, but I'm not sure the same is true for stamp duty?

I've read several places that say you're not allowed...but I've also read the article on adding stamp duty to your mortgage...which is kinda borrowing it...so am intrigued

Many thanks in advance. If I can't borrow the money, it's not the end of the world - but I'll have to increase my LTV...which would be frustrating for such a (relatively) small amount of money.

davidmcn

No problem I can see other than your solicitor may want confirmation of the source of all of the funds you're giving to them (for the purpose of money laundering regulations), so you might need a paper trail proving who lent it to you.

TrickyDicky101

It may well reduce the total amount that the bank is prepared to lend to you though, so just bear this in mind.

kingstreet

Idiophreak wrote: »

Are you legally *allowed* to borrow money for stamp duty?

There is no law involved, but you may wish to run such a scheme past your lender and solicitor.

The former will be concerned about affordability, while the latter will be tasked with identifying the source of all your initial funds.

firebird082

We are 'borrowing' from my parents both the deposit and the extra stamp duty we're having to pay. The solicitor required a 'gift' form for these funds, which we have completed. Not a problem. I believe it's only a problem if you tell anyone it's a loan rather than a gift.

laidbackgjr

firebird082 wrote: »

We are 'borrowing' from my parents both the deposit and the extra stamp duty we're having to pay. The solicitor required a 'gift' form for these funds, which we have completed. Not a problem. I believe it's only a problem if you tell anyone it's a loan rather than a gift.

Which is fine if it's a genuine gift, if it's a loan then you are committing fraud. What would your parents reactions be if you didn't pay them back (i.e. treated it as a gift?).

princeofpounds

Not a problem. I believe it's only a problem if you tell anyone it's a loan rather than a gift.

Yeah, not a problem until they can't pay the loan back!

Are you legally *allowed* to borrow money for stamp duty?

Yes, although as the others point out the solicitor may want to know about it for money laundering purposes, and they also act for your mortgage lender who may decide to use it as a factor in their LVT calculations, even if it is technically not part of the loan or the house value.

Idiophreak

Thanks all for your inputs on this...It's good to know that borrowing the money wouldn't cause (legal) problems at least.

My next question is on the actual mechanics of borrowing the money.

We're hoping to buy rather more rapidly that we'd first imagined, so haven't quite put all the savings aside we'd have hoped to - so we're a few thousand short of all the money we anticipate needing to move (stamp duty, fees, moving etc). This is a couple of months' savings for us, so not a huge amount of money in the scheme of things and we're keen to just rip the plaster off and get moved...but obviously we don't want to stuff up our mortgage application by taking a loan for this shortfall immediately beforehand. So, we have options:

1) Have parents lend us the money. Declare it as loan, agree repayments, shouldn't effect affordability, but saves a footprint on the credit file.

2) Take out a regular personal loan. Hope the footprint doesn't hurt the application too much.

3) Add on to an existing loan we have...push the remaining term out. In doing so, we could reduce our monthly payment by ~£150/month, which might actually help affordability (not that affordability is a problem). Limit total number of loans.

4) Apply for an overdraft from the bank (First Direct)- never really done this before...(I think it's £100 at the mo)..will they run a credit check before authorising an overdraft? Could I tell if they'd lend me enough before a credit search?

da_rule

For the existing loan, would they agree to extend and increase the value. The current things that I have seen when looking for mortgages seems to be they are less worried about the capital value of the debt and more concerned about the monthly outgoings (affordability) so this would seem a good option. Especially if there are no (or very limited) penalties for overpaying etc.

Personally I wouldn't want to borrow money from family/friends in a formal arrangement. But that's just my personal view.

Idiophreak

da_rule wrote: »

For the existing loan, would they agree to extend and increase the value. The current things that I have seen when looking for mortgages seems to be they are less worried about the capital value of the debt and more concerned about the monthly outgoings (affordability) so this would seem a good option. Especially if there are no (or very limited) penalties for overpaying etc.

Personally I wouldn't want to borrow money from family/friends in a formal arrangement. But that's just my personal view.

I'd be surprised if they didn't agree to extend the loan. We're 60% of the way through repaying it, we'd look to extend the outstanding balance by about 50% and double the remaining term...So we'd be borrowing less cash than we borrowed originally over a similar term.

Never missed a payment on anything, so I can't see them having a problem with it.

I'd rather not bother my parents if I don't have to. It's not that they'd mind or we'd fall out etc...I just feel that at my age (31) I should really have stopped messing around with their finances

benjus

Whatever you do, don't take out a bank loan to pay the stamp duty between exchange and completion, in case the mortgage lender decides to pull the offer due to a change in your credit record...