Can you add Stamp Duty to your Mortgage?

Can you add Stamp Duty Land Tax to mortgage?

“We often act for buyer’s who have managed to secure additional borrowing from their lender to enable them to cover the SDLT payable on completion” – Amrit Bhogal, Head of Property, RLK Solicitors.

When buying a home in England and Northern Ireland, you will most likely be required to pay Stamp Duty Land Tax (SDLT) upon completion of your purchase. This can be a rather significant outlay but fortunately, an amount to cover the SDLT that you will pay could be added to your mortgage.

It will depend upon your mortgage provider and whether they are willing to increase your loan.

What is SDLT?

SDLT is a form of property tax that you usually pay on increasing portions of the property price when you buy a property. The amount that you will be required to pay will depend on when you purchased the property, how much you pay for it and whether or not any reliefs or exceptions apply.

You will be required to pay a higher rate of SDLT if you are purchasing an additional property but have not yet sold your main residence. However, you can apply for a refund of the higher rate amount, if you sell your previous main home within 36 months of your purchase.

What are the SDLT rates?

The current SDLT rates for residential properties are as follows:

You will pay an additional 3% on top of the standard rates when buying a second home. This means an additional 3% on each rate band on the table above (e.g. the first £250,000 of the price you pay will be taxed at a rate of 3% and the next £675,000 at 8% and so on).

Do you need to pay SDLT?

Unless an exemption or relief applies, you are required to pay the full amount of SDLT within 14 days of your purchase. Late payment will result in a fine and interest penalties.

There are certain scenarios in which you may not have to pay SDLT. For example, those who are just getting started on the property market may be eligible for First-Time buyers relief, which means that:

• They are exempt from paying SDLT on properties valued at less than £425,000.
• They pay a discounted rate of SDLT on properties valued between £425,000 and £625,000.

So, can you ask for additional borrowing to cover the SDLT?

It may be possible for you to secure additional funds to assist you in paying the SDLT in completion. However, additional funds would likely mean a higher monthly repayment and more interest being paid to the lender during the loan term. You need to discuss your options with your mortgage broker or lender ahead of time.

Before deciding whether or not you’d like to add additional funds, you should first determine how much your SDLT payment will actually be. While the standard rates are listed above, you can use this free online calculator to determine the exact amount owed.

If, after determining your SDLT payment, you have weighed up your options and have decided to add additional funds to your mortgage, you should then contact your mortgage broker or lender to see if they are willing to provide you with additional funds.

Summary

In short, if you are asking the question: Can I add SDLT to my mortgage? The answer is yes, provided your lender agrees to provide you with additional funds. However, it could be a more expensive option if it means that you have to pay more interest to your lender each month. A mortgage broker could help you to determine the best course of action.