Buying a home is a wonderful thing. Collecting those keys, walking into a house that you can call your home. Being able to decorate the walls, renovate the kitchen and sleep in a bed in your very own bedroom. These things are priceless and something many of us take for granted. Buying a house is expensive though. A lot of us push the money we have to the absolute maximum in order to get the home we have dreamed of. As much as shopping around the for the best mortgage deal might save you some cash over the term of the repayments, have you even stopped to consider stamp duty? The question is, it can be a big old extra cost you might have not even thought about yet. Can you add stamp duty to mortgage?
What is stamp duty?
Stamp duty is a tax that is payable when you purchase a property. It is referred to as different things across the countries in United Kingdom but essentially it's the same thing. You buy a house or a flat, you have to pay some tax on it. This varies depending on location and the price of the property you are buying. You might get hit with tens of thousands of pounds when buying a house in one place for a certain price, compared to buying a different priced property elsewhere. The reality is though, that it can add a major additional expense. You might ask if you can you add stamp duty to mortgage?
There has been a temporary drop in stamp duty during the Coronavirus pandemic, so if you bought a house or moved between 8 July 2020 to 31 March 2021, you will not have paid anything on the first £500k of a new house. Keep an eye on government announcements to see if this will be extended and what the rates will be after this.
What is a mortgage?
In basic terms, a mortgage is a loan that you take out in order to buy a house or a property. The loan is secured against the vale of the property you're buying and you'll have monthly instalments to pay it off. There will be interest added on top, which is how the lender makes their money. If you don't keep up your payments, your house can be repossessed by the lender, who will sell it on to get their money back. In order to get a mortgage, you'll need a deposit.
The more of your own money you can put forward as a deposit, the better rates you'll be offered. This will include the amount you'll be able to borrow along with the interest rates and term that you pay it back. You might borrow £100,000 but the amount you pay back over the term of your mortgage could mean you end up paying £150k. This is how people are able to buy houses and how banks and other mortgage lenders make money.
Can you add stamp duty to mortgage?
The short answer to the question of can you add stamp duty to mortgage, is yes. You can.
However, stamp duty has to be paid at the time of purchase, so it will be an extra lump sum to your mortgage that you will end up paying interest on. Adding an extra £5k or £10k to your mortgage will mean higher repayments and more money to be repaid, with added interest. You're simply setting yourself up with a bigger mortgage debt if you add your stamp duty to your mortgage. However, lots of people simply have to.
Most of us don't have a spare £5k to simply pay off the stamp duty there and then. One thing to try and do is bid lower than you can. If you're able to put a cheeky bid in below the asking price, knowing you'll be able to use that difference to pay the stamp duty, that's a great idea. Maybe look at houses or in different areas where prices are lower. A main residence below £125k, will have no stamp duty associated with it. If you bought for £130k, you'll have to pay 2% of the £5k over £125k. If it's a second property, you'll have £4k in stamp duty to find!
As you can see, different buyers, different places, different houses and prices mean different amounts of stamp duty. Use a stamp duty calculator to see how much you'll have to pay.
So, can you add stamp duty to mortgage. Yes you can. It's not advised, but it's sometimes all that people an do.
How do you save for a house?
Saving for a house is easier than you might think. The first thing you need to do is change your money mindset. Rather than spending, you need to focus on spending. If the safety and security of your own home is what you want, you need to make that your priority. Start saving today. Change your energy company to ensure you are on the best deal. Cut out takeaways and make your food budget stretch further. Cut out the monthly subscriptions. Find ways to cut back on your day to day spending. Sell things you don't need. Put your time and effort into building a money pot for a house deposit. Click here for more top tips on how to save money for a house. You'll soon be in that place you want to call home.
Top tips when moving house
Moving house comes with additional expenses you may not have thought of, on top of that stamp duty payment. You need help moving, so shop around for the best price. If you're moving locally, call in a favour from friends and hire your own van for the day. You might be able to do it with the vehicles you and your friends own if you're not moving far. If a sofa doesn't fit in, walk it the couple of streets to the new house!
When you move in, be sure to switch energy companies as the one currently servicing the house isn't likely the cheapest. Be sure to declutter before you move, there is little point packing stuff you don't need. Label your boxes properly so they can go straight to where they need to be. Start eating out of the freezer in the weeks before you move so you don't have food to throw away or move with you.
As so many of us are working from home right now, if you need broadband, organise it for the day you move in. That way you'll have less downtime. For electrical items, take a photo of where the wires go so it's easier to set up when you get to your new home. Update your address with companies, register to vote and pack a survival bag or box. This can include the kettle, some tea bags and milk. Also include any important medicine, a change of clothes for the kids and nappies/wipes for the baby. Loo roll, phone chargers and any phone numbers of solicitors and important people to do with your house move.
Moving house is an exciting time and you should enjoy it. Can you add stamp duty to mortgage? If you have to, do it, but if you can pay it, it'll save you money in the long run.