Paying stamp duty

Greggy

Hi all,

I'm facing a battle to raise enough capital to pay deposit and stamp duty, and was wondering whether its possible to add stamp duty to the mortgage loan? The article on this site explaining stamp duty suggests that I can, but three different mortgage brokers have basically scoffed at the idea of it. Please could anyone explain whether I have I misunderstood something in the article?

Our details are as follows:
Asking price 785k, we have offer accepted at 770k, so stamp duty is 30.8k.
The property is a new build flat, which seems to mean that we need a 15% deposit, I.e. 115.5k.
We can just about do 146.3k for 15% deposite + stamp duty, but this would be a stretch.

However, if I can add stamp duty to asking price to make total amount 800.8k, then 15% is only 120.12k, which is far easier to do than 146.3k.

Please could someone advise me as to whether this is possible?
If not possible, please can someone suggest an alternative solution, e.g. Separate loan from mortgage lender.

A radical solution would be to agree with developer that we would pay full 785k in return for them paying 15k towards stamp duty, but no idea if this would work?!

Thanks so much for your help in advance, I really appreciate it.

(P.s. affordability criteria for all this is fine, it's just the initial squeeze on capital hat I'm trying to solve, thanks)

amnblog

you cannot add stamp duty to your mortgage.

if the builder agrees to pay it, it will likely cause an issue with your lender

Greggy

Hi amnblog,

Thanks for your quick reply. This seems to be the case, and so I must have misinterpreted the article on this website. Please could you, or anyone else, explain what it actually means?!

To save time,

I've cut-and-paste the relevant part of the article below...

...

"Can I add stamp duty to my mortgage?

The simple answer here is that it's best that you don't, but many people find that they have to.

Doing this could affect your Loan-to-Value ratio (LTV) - the measure of how much of a property's value you are borrowing - for the worse.
To add the cost of stamp duty to your loan is a case of borrowing more when the mortgage is taken out. So, say you needed a £220,000 mortgage to purchase a house costing £300,000, but wanted to add the stamp duty, you'd need to request borrowing of £229,000.

There are two main things to consider here. Firstly, as mortgages tend to be taken out over a long term (25 years or more), that's normally how long the stamp duty borrowing will last too. Over a 25-year term, at a rate of 5%, that extra £9,000 borrowing will cost around £7,000 in interest, so it's vital to be aware of the cost.

Secondly, this could affect your loan-to-value ratio (LTV) - the measure of how much of a property's value you are borrowing. The most competitive deals require a maximum LTV of 75% - yet in the example above, adding the stamp duty would push you from 73% to 76%, so be careful - speak to a whole-of-market mortgage broker."

...end of article...

Thanks again for your help, greggy

amnblog

Yes, you have misunderstood.

The brokers are correct.

You are putting in 15% deposit and borrowing 85%. if you want to borrow an extra 4% for the stamp duty you need to borrow 89% so you need a 90% mortgage offer rather than 85%.

You can borrow the extra but not with the mortgage offer you have now.

You will have to change product and possibly lender and meet affordability.

Have you spoken to your broker about this?

StuC75

If you cant afford the deposit and stamp duty then you are looking to buy a house that is too expensive for you at this moment. look for something that you could get in that price range with a 10% deposit instead so that you can afford it on what you have..

besides needing a valuer to agree to an over valuation -as in the bank would need to be lending to you above what it is valued\selling at to keep with the 85% Ltv range.. New builds have a premium that is soon wiped out, so you could easily find yourself with little actual equity in the property.. MSE articles tend to be quite generic in what they cover and your circumstances are a little out side of that (e.g. New Build requiring 85% ltv is your main ceiling point)..

egoode

If you have a 15% deposit can you not just change that to a 10% deposit and then you will have the cash available for stamp duty? If you can't get a mortgage with a 10% deposit then you are probably can't afford the place you are trying to buy and should probably look for something a bit cheaper.

amnblog

As my gran used to say 'your eyes are bigger than your belly'

Greggy

egoode wrote: »

If you have a 15% deposit can you not just change that to a 10% deposit and then you will have the cash available for stamp duty? If you can't get a mortgage with a 10% deposit then you are probably can't afford the place you are trying to buy and should probably look for something a bit cheaper.

Thanks egoode, the challenge is finding a lender that will have product at 90%ltv on a new buld flat. Do you, or anyone else, happen to know of one?

Thanks, greggy

amnblog

Greggy wrote: »

Thanks egoode, the challenge is finding a lender that will have product at 90%ltv on a new buld flat. Do you, or anyone else, happen to know of one?

Thanks, greggy

Not at that price level

Greggy

amnblog wrote: »

As my gran used to say 'your eyes are bigger than your belly'

Hi amnblog, I can see how it might look like that!

I don't think that is the case though. Woolwich are prepared to lend us just over 1 million based upon salary and outgoings, and we have an agreement in principle from halifax that would lend us 850k. We are only looking to borrow 650k or so, which is well within our limits.

We just face a short term capital squeeze that I'm trying to get around. The mortgage repayments from woolwich are 3.1k/month, but my partner and I have a combined take home of just over 10k after tax. That's why I think a loans might be an option.

Of course, we could just withdraw our offer, save up another 20k or so, and then find a new place, but we are v keen on the flat we have already found.

Thanks, greggy

amnblog

Can you not get a 'gift' from family?