Stamp Duty is not usually added to your mortgage as a separate cost. Instead, some buyers may be able to borrow more against the property. This can reduce the amount of cash needed for the deposit. The money you keep back can then be used to pay Stamp Duty.
Whether this works depends on your lender and your overall financial position. They will look at affordability, loan-to-value and the property’s value. Your income and existing commitments will also affect how much you can borrow. In practice, the lender is still funding the property purchase, not paying HMRC directly.
For example, you might plan to use £60,000 of savings as your deposit. If your lender allows a slightly larger mortgage, you may use £50,000 instead. That could leave £10,000 available towards your Stamp Duty bill and other purchase costs.
In this guide, we’ll explain:
Stamp Duty is not usually added to your mortgage as a separate charge. Instead, some buyers may be able to fund it indirectly by borrowing more against the property. This can reduce the amount of cash needed for the deposit. The cash you keep back can then help cover your Stamp Duty Land Tax bill.
The important point is that your lender is still funding the property purchase. They are not lending money directly to HMRC to pay the tax. Any extra borrowing forms part of your mortgage and remains secured against your home.
For example, imagine you have £70,000 available in savings. You may originally plan to use £60,000 as your deposit. That would leave £10,000 for Stamp Duty and other purchase costs.
If your lender allows a larger mortgage, you might use £50,000 as your deposit instead. You would then retain an extra £10,000 in cash. That money could be used towards your SDLT bill at completion.
Whether you can borrow more will depend on your lender’s criteria. They will usually consider:
Borrowing more can also increase your LTV. This may affect the mortgage products available to you. It could also influence the interest rate your lender offers.
This is why it helps to think about Stamp Duty before finalising your mortgage structure. Your mortgage adviser or lender can explain how much you may be able to borrow. Your conveyancing solicitor will then deal with the legal side, including SDLT during the completion process.
So, you cannot normally ask your lender to simply add Stamp Duty onto the purchase price. However, increased mortgage borrowing may let you use less cash for the deposit. You can then retain more of your savings for SDLT and other completion costs.
A simple example makes this easier to understand.
Imagine you're buying a property for £400,000. You have £80,000 available in savings. For a standard-rate residential purchase in England or Northern Ireland, SDLT on £400,000 is currently £10,000.
Your options might look like this:
|
|
Original Mortgage |
Increased Mortgage |
|
Property price |
£400,000 |
£400,000 |
|
Available savings |
£80,000 |
£80,000 |
|
Deposit used |
£80,000 |
£70,000 |
|
Mortgage required |
£320,000 |
£330,000 |
|
Cash retained |
£0 |
£10,000 |
|
Cash available towards SDLT |
£0 |
£10,000 |
With the original mortgage, your full £80,000 would go towards the deposit. You would still need another £10,000 for Stamp Duty.
The revised mortgage uses a smaller £70,000 deposit. You borrow an extra £10,000 through the mortgage instead. That leaves £10,000 of your savings available to cover the SDLT bill.
However, the larger mortgage also changes your loan-to-value ratio, or LTV. With an £80,000 deposit, you borrow 80% of the property's value. Reducing the deposit to £70,000 increases the LTV to 82.5%.
That change matters because lenders use LTV when assessing mortgage applications and pricing products. A higher LTV may affect your available mortgage deals, interest rate or borrowing options. It can also increase the risk of issues arising later, as explained in what can go wrong after a mortgage offer.
The example also shows why Stamp Duty is not literally added to your mortgage. Your lender still provides a mortgage against the property itself. You simply borrow more and keep additional cash available for the tax.
These figures are illustrative only. Your actual Stamp Duty liability and borrowing options will depend on your circumstances. First-time buyer relief, additional property rates and other factors can also change the SDLT due. Discover more about how to claim back stamp duty here.
Borrowing more usually increases your loan-to-value ratio, often shortened to LTV. LTV shows how much you are borrowing compared with the property’s value.
For example, imagine you are buying a home for £400,000. If you borrow £320,000, your LTV is 80%. If you borrow £330,000 instead, your LTV rises to 82.5%.
That difference may look small, but it can affect your mortgage options. Lenders often group mortgage products into LTV bands. Moving into a higher band can reduce the number of products available to you.
A higher LTV can also affect the interest rate you are offered. In general, lenders see higher-LTV borrowing as carrying more risk. That is because you have less equity in the property from the outset.
This is why borrowing more to retain cash for Stamp Duty needs careful thought. You may solve one short-term budgeting problem, but change the structure of your mortgage.
Before adjusting your deposit, consider how the higher borrowing could affect:
Your lender or mortgage adviser can explain how different deposit levels affect your LTV. They can also show how those changes may influence the mortgage products available.
The key point is simple. Borrowing more can leave extra cash available for Stamp Duty, but it also increases your LTV. That change can affect both your mortgage options and the long-term cost of borrowing.
Yes, borrowing more to cover Stamp Duty indirectly can cost more over time. You reduce the amount of cash needed now, but increase the mortgage you must repay.
The extra borrowing attracts interest in the same way as the rest of your mortgage. Your monthly repayments may therefore increase. The longer you keep that additional borrowing, the more interest you could pay overall.
Imagine you increase your mortgage by £10,000 to retain cash for Stamp Duty. You do not simply repay that £10,000 later. Interest is also charged throughout the mortgage term.
How much extra you eventually pay will depend on several factors:
The mortgage term can make a particularly big difference. Spreading £10,000 across 25 years may keep the monthly increase relatively manageable. However, you could pay interest on that borrowing for many years.
A shorter mortgage term may reduce the overall interest cost. However, it can also mean higher monthly repayments. This is why it is important to consider both affordability today and the longer-term cost.
The trade-off is fairly simple. Borrowing more can leave you with more cash available at completion. However, you may repay considerably more than the amount originally borrowed over time.
That does not automatically make increased borrowing a poor choice. For some buyers, keeping enough cash available for Stamp Duty makes the purchase more manageable. The same trade-off applies when you remortgage to release equity, where extra borrowing can improve short-term flexibility but increase long-term costs.
A mortgage adviser can help you compare different borrowing amounts and mortgage terms. This gives you a clearer picture of the monthly and long-term impact before you commit.
You should work out your likely Stamp Duty costs as early as possible. Ideally, do this before making an offer on a property. This gives you a clearer picture of the full amount you may need.
Stamp Duty should sit alongside your deposit, legal fees and other buying costs. It should not be left until completion.
Try to estimate your SDLT liability:
If you instruct us at TBI Conveyancing, we’ll help you understand how Stamp Duty fits into your purchase costs. Our property purchase solicitors can explain the legal costs involved and confirm the SDLT position based on your transaction. We’ll also explain how much money you need to provide before completion.
As your purchase progresses, we’ll prepare a completion statement showing the money coming in and going out. This usually includes your mortgage advance, deposit, legal costs, Stamp Duty and remaining purchase funds. Seeing everything together makes it much easier to understand what you need to pay.
Your mortgage adviser or lender will deal with borrowing capacity and mortgage affordability. We’ll take care of the legal and completion side. Keeping both sides organised early can help avoid an unexpected shortfall close to completion.
Your conveyancing solicitor usually handles the Stamp Duty process as part of the wider conveyancing process. You provide the money required, and your solicitor submits the SDLT return and payment to HMRC.
The mortgage lender does not normally pay your Stamp Duty directly to HMRC. Instead, the mortgage advance forms part of the money available to complete your purchase.
We bring these different amounts together and make sure everything is ready for completion. Here’s how the process usually works.
We’ll establish how much SDLT is due based on your purchase details. This gives you time to understand the amount required before completion.
Before completion, we’ll provide a completion statement showing the financial position of your purchase.
This usually includes:
The completion statement makes it clear how much money we need from you.
You’ll transfer any remaining funds to us before completion. This may include money towards the purchase price, Stamp Duty and legal costs.
We’ll tell you how much is required and when we need it.
If you’re buying with a mortgage, we’ll request the agreed funds from your lender. These funds are sent to us rather than directly to HMRC.
Once all required funds are available, we send the completion money to the seller’s solicitor. The purchase can then complete and ownership passes to you.
After completion, we’ll submit the required SDLT return to HMRC using the details from your transaction.
Where SDLT is due, we’ll arrange payment to HMRC using the funds you’ve provided.
This is the key point when thinking about adding Stamp Duty to a mortgage. Your lender does not simply add the tax and pay HMRC. Your mortgage advance forms part of your overall purchase funds, while we handle the SDLT payment.
Once completion and SDLT are dealt with, we’ll continue the post-completion work. This includes registering your ownership and your lender’s charge with HM Land Registry.
We’ll guide you through each stage and explain what money is needed. You do not need to manage separate payments to the seller, lender or HMRC yourself.
A completion statement is a financial summary prepared by your conveyancing solicitor before completion. It shows the money coming into the transaction, the costs being paid and the final balance you need to provide.
For most buyers, this is the clearest document for understanding the final cost of the purchase. It brings together the different amounts that have built up during conveyancing. It also helps you see exactly what still needs to be paid before completion.
A completion statement will typically include:
This is one of several important documents used during the buying process. Understanding what documents do solicitors need when buying a house can make the wider conveyancing process much easier to follow.
For example, your statement may show a £300,000 purchase price and a £240,000 mortgage advance. It may then list your deposit, Stamp Duty and legal costs. The final figure shows exactly how much money you still need to provide before completion.
At TBI Law, we’ll prepare your completion statement and explain anything that is unclear. We’ll also confirm when your remaining balance needs to reach us, helping you avoid last-minute funding problems.
The statement also helps you understand what happens on completion day, because it shows how the final purchase funds are brought together before the transaction completes.
Some first-time buyers do not pay Stamp Duty, but others still will. In England and Northern Ireland, eligible buyers can claim first-time buyer relief on qualifying residential purchases.
At the moment, eligible first-time buyers pay no SDLT on the first £300,000. They then pay 5% on the portion between £300,000 and £500,000. If the property costs more than £500,000, first-time buyer relief does not apply.
To qualify, every buyer named on the purchase must usually be a first-time buyer. You must also intend to use the property as your main home. If one buyer has owned property before, the relief may not be available.
This means being a first-time buyer does not automatically make your SDLT bill zero. The final amount depends on the purchase price and your circumstances.
It is worth checking your likely Stamp Duty cost before finalising your purchase budget. That figure can affect how much cash you need alongside your deposit, legal fees and other costs.
At TBI Law, we can help explain how SDLT fits into the legal purchase process. We can also confirm the amount due once we have the details of your transaction.
Because Stamp Duty thresholds can change, always check the latest GOV.UK Stamp Duty guidance before relying on any figures.
If you cannot afford the Stamp Duty, do not assume the purchase is automatically impossible. However, it is important to identify the shortfall before you exchange contracts. You can then discuss the available options with your mortgage adviser, lender and conveyancing solicitor.
Possible options may include:
Remember to include legal fees, searches, Stamp Duty and other buying costs in your budget. You should also allow for moving costs and any immediate work the property may need.
Your mortgage adviser or lender can explain your borrowing options and affordability. At TBI Law, we can explain the legal costs and completion funds you will need. Identifying any funding gap early gives you more time to find a suitable solution.
You may be able to borrow money separately to help pay Stamp Duty. However, taking on extra debt can affect your mortgage affordability and lender checks.
Possible sources might include:
The important point is that any extra borrowing becomes part of your overall financial commitments. Your mortgage lender may consider this when assessing affordability, income and monthly outgoings.
That means arranging separate credit shortly before completion could affect your mortgage application. It may also change how much your lender is prepared to advance.
Before taking on extra borrowing, speak to your mortgage adviser or lender. They can explain how it may affect your application and whether your overall purchase remains affordable.
One of the easiest mistakes is focusing only on the deposit. Stamp Duty can add a significant amount to your upfront costs.
Work out your likely SDLT bill early and include it in your purchase budget. This gives you more time to adjust your plans if needed.
Your mortgage does not normally include Stamp Duty as a separate charge. Your lender is financing the property purchase, not paying HMRC directly.
If you want to retain more cash for SDLT, you may need to borrow more. That option will depend on your lender’s criteria and your circumstances.
Using a smaller deposit can leave more cash available for Stamp Duty. However, it also increases your loan-to-value ratio.
A higher LTV may reduce your mortgage options or affect the interest rate available. Always consider the wider impact before changing your deposit.
Borrowing an extra £10,000 does not mean you only repay £10,000. Interest is charged throughout the mortgage term.
This can make a smaller short-term cash requirement more expensive over time. Compare the immediate benefit with the long-term cost before deciding.
The worst time to discover a funding gap is just before completion. By then, your options may be limited and delays can become stressful.
Planning early makes the whole process much easier. If you understand your deposit, Stamp Duty and other costs from the start, you are less likely to face an unexpected shortfall later.
Stamp Duty should form part of your overall purchase budget from the beginning. Alongside your deposit, you need to consider legal fees, other costs and the money required for completion.
Our conveyancing team can:
We’ll make sure you understand what needs to happen and when. We’ll also explain what money you need to provide before completion.
If you’re buying a property and need help with the legal process, get in touch with our conveyancing team. We’ll guide you through your purchase and help make the process as straightforward as possible
