Can stamp duty be added to your mortgage?

Posted 01st August 2023 by ctatax-admin

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.

Stamp Duty Land Tax (SDLT) is a significant cost that homebuyers in the United Kingdom must consider when purchasing a property. As buyers explore various options to manage their finances, a common question arises: Can Stamp Duty Land Tax be added to your mortgage? In this blog post, we will explore the concept of incorporating SDLT into your mortgage, discuss the potential implications, and evaluate the feasibility of this approach.

Understanding Stamp Duty Land Tax (SDLT): SDLT is a tax imposed by the UK government on property transactions exceeding certain thresholds. It is calculated based on the purchase price of the property and is typically paid by the buyer within 1414 days of the completion of the transaction.

Adding SDLT to Your Mortgage: The concept of adding SDLT to your mortgage involves incorporating the SDLT amount into the overall mortgage loan, spreading the tax payment over the loan term. While it may seem like an appealing option, it is essential to consider the potential implications and feasibility.

Potential Implications:

1. Immediate Financial Relief: Adding SDLT to your mortgage can provide immediate financial relief by alleviating the burden of paying the tax upfront. This allows homebuyers to preserve their available funds for other essential expenses related to the property purchase, such as legal fees or home improvements.

Read: How to tell if you’ve overpaid on stamp duty land tax

2. Increased Loan Amount: Adding SDLT to your mortgage increases the total loan amount, as it includes not only the property purchase price but also the tax liability. Consequently, this may impact the loan-to-value (LTV) ratio, which measures the loan amount relative to the property value, potentially affecting mortgage terms and eligibility criteria.

3. Long-Term Costs: While spreading the SDLT payment over the loan term may provide short-term relief, it is important to consider the long-term financial implications. By including the tax amount in your mortgage, you will ultimately pay interest on the SDLT over the loan period. This may result in higher overall costs compared to paying SDLT upfront.

Feasibility and Considerations:

1. Lender Approval: Incorporating SDLT into your mortgage depends on the policies and willingness of your mortgage lender. Some lenders may be open to including SDLT in the loan amount, while others may have restrictions or specific criteria regarding the inclusion of additional costs.

2. Affordability and Loan Eligibility: Adding SDLT to your mortgage affects the overall affordability of the loan. Lenders consider factors such as income, debt-to-income ratio, and credit history to assess loan eligibility. Including SDLT in your mortgage may impact these factors and potentially affect loan approval.

3. Legal and Administrative Considerations: Implementing a system where SDLT is added to your mortgage would require legal and administrative changes. It would involve coordination between the government, lenders, and other stakeholders to ensure a smooth process and accurate documentation.

Conclusion:

While the idea of adding SDLT to your mortgage may offer immediate financial relief, it is essential to consider the long-term implications, increased loan amount, and potential higher overall costs due to accumulated interest. The feasibility of adding SDLT to your mortgage depends on the policies of your lender and factors such as affordability and loan eligibility. Before considering this approach, it is advisable to consult with mortgage advisors or professionals to understand the specific implications, evaluate the financial impact, and make an informed decision that aligns with your individual circumstances and goals.

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.