Seller paying stamp duty - impact on LTV

andymd

We are looking to buy a house that is on the market for around £525k, as we would rather not have to pay 4% stamp duty, we bid £500k hoping this would be enough. However there are other bidders and the price being offered is now over £500k. The estate agent suggested the sellers might accept £515k and they would pay the incremental 1% stamp duty.

At first, I just thought why not take £510k and let us pay our own stamp duty, then I thought it might actually work in our favour because buying a £515k house and having £5k less stamp duty to pay means we'll be in a better LTV bracket.

However, I have read conflicting views online about this , some claiming that the lender would take the purchase price minus the stamp duty incentive which would therefore mean it makes no difference to us if we pay the stamp duty ourselves or not.

Other suggest it is Land Registry Fraud, which I doubt is true given that builders have been offering these kind of incentives publicly for years.

I spoke to Nationwide yesterday and they categorically said the stamp duty is completely separate and as long the valuation matched the actual purchase price, the stamp duty incentive would not be relevant.

Does anyone have any experience doing this? We'll still go ahead even if it means a higher LTV but just looking to see how likely this is?

Mortgage_Mark_2

This situation would vary from lender to lender; some would only allow certain incentives to account for a certain amount of the purchase price, others like Nationwide may be ok with it.

Ultimately if Nationwide have said that they are ok with it then that's your main concern as far as the mortgage is concerned; just check how it actually will work when it comes to completion and paying the SDLT - the builder schemes work by giving cashback on completion to the value of the SDLT, since the buyer has to pay it (I mean they have to actually conduct the transaction through their solicitor).

kingstreet

No lender accepts cash incentives except those offered by builders.

(Family members can buy from each other under concessionary purchase, as can a tenant from a landlord but they are separate specific situations.)

If such an agreement is reached, the incentive will simply be deducted from the valuation, leaving you back at square one - where you would have been with a price reduction.

I suspect if the person on the end of the phone understood your question properly you would have got a different answer. Try calling again and asking someone else.

amnblog

It is hard to say who is more deluded.

The Nationwide Employee who told you such an arrangement will not affect the mortgage, or the Estate Agent who thinks it is smart for someone to pay £5,000 in tax to get a £510,000 purchase.

Your offer is a sensible one - stick with it, or look elsewhere.

Let someone else pay over the top.