Can I Add Stamp Duty to My Mortgage?

Stamp Duty Land Tax is one of the biggest additional costs homebuyers face in the UK, especially in London and the South East where property prices are higher. Understandably, many buyers wonder whether they can add this cost to their mortgage rather than paying it upfront. In this blog, we will explain whether that is possible, what your options are, and what you should consider before making a decision.

What Is Stamp Duty?

Stamp Duty Land Tax (SDLT) is a tax you must pay when buying a property over a certain price in England and Northern Ireland. The amount you pay depends on the value of the property and whether you are a first-time buyer, a home mover, or buying an additional property.

For most residential properties, the standard rates begin at purchases over £250,000. First-time buyers benefit from a reduced rate, and there are higher rates for buy-to-let properties or second homes.

Can Stamp Duty Be Added to a Mortgage?

In short, lenders will not allow you to directly add the cost of stamp duty to your mortgage as a separate item. However, it is possible to increase your mortgage borrowing amount to cover both the purchase price and any other costs you may have, including stamp duty, if your affordability and loan to value ratio allow it.

For example, if you are buying a home for £300,000 and need to pay £2,500 in stamp duty, you could apply for a mortgage of £302,500, as long as your lender agrees and you meet the affordability criteria. It is worth noting that this effectively increases the size of your loan and the interest you will pay over the term of your mortgage.

What Are the Pros and Cons?

Pros:
• You can spread the cost of stamp duty over the term of your mortgage
• It may reduce the need for upfront cash at completion
• Can help buyers with limited savings

Cons:
• You will pay interest on the extra amount borrowed
• Your loan to value ratio will increase, which could affect your mortgage rate
• Not all lenders will approve a higher loan to include stamp duty
Things to Consider
• Affordability checks: Your mortgage lender will assess whether you can afford the higher monthly payments.
• Loan to value (LTV): A higher LTV may push you into a different bracket with less favourable interest rates.
• Total cost: Although spreading the cost can help with cash flow, it can also make the property more expensive in the long term due to interest.

What Are Your Alternatives?

If you are concerned about covering the cost of stamp duty, consider the following:
• Savings: Try to budget for stamp duty from your own funds where possible.
• Gifted deposit: Family members may be able to help with a gift towards costs.
• First-time buyer relief: If you are eligible, this could significantly reduce or eliminate your stamp duty bill.

Speak to a Mortgage Adviser

Every situation is different, and while it may be possible to borrow more to cover stamp duty, it is not always the best financial choice. A qualified mortgage adviser can help you understand your options and find the most suitable solution based on your circumstances.
At Coreco, our team of experienced mortgage advisers is here to help guide you through the process. Whether you are a first-time buyer, moving home, or investing in a second property, we can help you make the most informed decision.

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