Proof of stamp duty funding needed as well as deposit for full mortgage application?

lizards

I know it's necessary to have proof of deposit when putting in the full mortgage application, but is it (ever?) necessary to show anyone (solicitor, lender, even EA) proof of the stamp duty on top too?

Reason I'm asking is that while I know we would easily have enough savings/equity to cover both deposit and stamp duty by the time a property might exchange (or even complete), depending on the value of a property we offer on, we may only have enough to cover the entire deposit and just some of the stamp duty at the time of a full mortgage application. If proof of stamp duty as well as deposit has even a slight chance of being required, this would change our upper limit on offers we might make, so we'd rather know in advance!

Thanks!

aoleks

No one is asking for it, not even proof of deposit. Your solicitor will check your deposit and tick a box on the lender’s system confirming that the amount you requested plus your deposit is enough to cover the house price.

[Deleted User]

The above response makes no sense at all.  Plenty people could ask for it.  The solicitor doesnt have access to any lenders system. They arent ticking any boxes.

As a broker I wouldnt be fussed about you being a bit short of the complete amount as long as we can evidence in some form that you have disposable income that you can save.   I have never had a lender ask for more than proof of deposit.  An estate agent if they push for documents will just need AIP+ Proof of deposit, never come across one who goes beyond the bare minimum for this.   A solicitor will need evidence of all funds to complete the transaction but they usually wouldnt start requesting proof of this until much later in the transaction.   
The only time a solicitor will contact the lender re a deposit is if there is any gift involved or if the source of the funds is less than normal.   They would just send a memo saying 'deposit funds coming from spain,  please confirm you are happy to proceed' (for example).

I have plenty people who buy before having 100% of all the funds in place.    

lizards

Awesome, thank you! Yep, we do have plenty of disposable income we are regularly saving. Ideally we would have waited longer to save up more, but our hand was forced when the neighbours announced they're planning on building an extension right outside my home office (I WFH FT even pre-Covid), so we've brought forward our moving plans by almost a year.

Does this mean we would not necessarily need proof (in the bank/equity) of the full deposit either at application time; just very strong evidence that we'd have it by the time the solicitor required it later on? One of the options we're considering is adding the stamp duty to the mortgage, which would obviously require a greater deposit due to LTV, but would mean a lower final amount required from us at completion. We'd then overpay the mortgage to mitigate some of the interest-related penalty for that.

[Deleted User]

I cant really speak to everyone but personally if your case came across my desk I would look at your disposable income and make a judgement call. Is this person who can show £1000 monthly savings over the last year going to make up this £2000 shorftall in deposit before exchange?  Likely yes and I will move forward.  If I dont get that feeling I am then wondering where the rest of the money is coming from and I would probably put the brakes on as I need to evidence that I have verified the source of deposit.  

If we then move forward then I am just going to avoid a few lenders I know are picky about needing all deposit in place.  Most high street lenders dont generally ask for a lot. They leave it up to us to do the due diligence for them. 

You might find other brokers take a different view as we have different compliance requirements and risk thresholds.  


You cant add the stamp duty to the mortgage btw, you can borrow more on a mortgage and put less deposit down.  The saving you make on your deposit is then used to pay the stamp duty.   Its kind of the same thing at the end of the day and some banks directly will say you can add the stamp duty but you arent really. You are just borrowing more and putting less deposit

lizards

Thanks! That sounds very sensible; we would easily be able to demonstrate that and hopefully whichever broker we go with will do similarly.

That's interesting about adding stamp duty to the mortgage. I'd assumed from the way I've often seen it mentioned online that it would be a case of increasing the total amount borrowed and then offering a deposit based on the house price + stamp duty cost combined to preserve the LTV %. But of course, from the lender's perspective, the stamp duty on top is not something they can get back if a borrower defaults, as they want the required LTV buffer on the house price alone. So adding it to the mortgage wouldn't work for us as we'd cross an LTV threshold, meaning they wouldn't lend to us at the multiple we need for affordability.