Can I add Stamp Duty to the mortgage?

hotnoise

I'd been told by others that I could add the Stamp Duty to the mortgage rather than having to fork it all out myself right away, but when I mentioned that to the Mortgage Broker he said it wouldn't be possible - the only way it would be possible is if I'd increased the deposit amount.

I'm a first time buyer, using HTB, with a property value of £450,000. I'm looking to pay the minimum 5% deposit (£22,500), use the 40% equity loan (£180,000) and take out a mortgage for the rest (£247,500). I was under the impression I could just increase the mortgage amount to £255,000 to cover the £7,500 Stamp Duty that'll be due. No?

Slithery

No.

davidmcn

I often wonder what happened to to all my clients in the late 90s who had 100% mortgages plus stamp duty and all their other fees (i.e. they effectively started in negative equity). But those days are gone, you'll need to have your deposit plus all the expenses.

hotnoise

Ok, is it possible to elaborate on why this isn't possible? I'm just curious how others have managed it, and a quick Google shows a number of sites stating it as an option (e.g. Natwest).

davidmcn

hotnoise said:

Ok, is it possible to elaborate on why this isn't possible? I'm just curious how others have managed it, and a quick Google shows a number of sites stating it as an option (e.g. Natwest).

Because it increases the amount of your loan. If your broker says it can't be done with your circumstances then that is probably the correct answer, there's no general principle that you can just chuck on stamp duty without it upsetting the figures.

dimbo61

Well stamp duty is a tax.
As a FTB you don't pay stamp duty on the first £300,000 so I take it that the £7500 you mention is the stamp duty between £300,000 and £450,000 ?
However if you add this to the mortgage or take it off your deposit then your not putting down a 5% deposit.
Keep saving and remember 5 years will soon fly past and then you need to factor in the HTB loan payments as well as the normal mortgage costs.

[Deleted User]

The mortgage company will lend a maximum of 95% of the purchase price. 
If you are already borrowing 95% then you have no more room to borrow more.

People who have 'added' stamp duty to the mortgage are either:

Mistaken
Or
They had a bigger deposit and kept some of it back to pay for stamp duty. If they had 8% deposit and mortgage for 92% then they might have increased mortgage to 95%.  This sounds like they are adding stamp duty to the mortgage but actually they are just putting less deposit down. 

[Deleted User]

Or they could be talking about mortgages from yesteryear when regulations were different.  My first mortgage was for 120% of the purchase price.   Not allowed anymore

Edit.... The natwest one is talking about borrowing more and putting less deposit to pay for stamp duty. Not possible at 95% ltv.
Also, its terribly confusing marketing material from a lender

Caz3121

£255k mortgage on £450k property is 56.67% + 40% HTB = 96.67%

hotnoise

dimbo61 said:

Well stamp duty is a tax.
As a FTB you don't pay stamp duty on the first £300,000 so I take it that the £7500 you mention is the stamp duty between £300,000 and £450,000 ?
However if you add this to the mortgage or take it off your deposit then your not putting down a 5% deposit.
Keep saving and remember 5 years will soon fly past and then you need to factor in the HTB loan payments as well as the normal mortgage costs.

Right, ok, that makes sense. The decision in principle for the mortgage is well in excess of the amount I need to borrow, which is why I was confused that I couldn't just increase it above the exact amount I needed, but what you've said makes perfect sense: the deposit would be below 5% of the total amount.

Chumy

Most NewBuilds have stamp duty paid as an incentive. Did you ask?
That will be a deal breaker for me as New builds are over priced and every little savings helps
Thanks