Can You Add Stamp Duty (SDLT) to Your Mortgage?
Article summary
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Lenders normally do not allow buyers to add SDLT directly to a mortgage, but they may lend additional funds if they are satisfied that they meet their strict lending criteria
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Borrowing SDLT means that you are likely to pay much more over time in the form of added interest
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Stamp Duty Land Tax (SDLT) is a government tax payable on most property purchases in England and Northern Ireland
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Borrowing limits are based on the property’s value, not on additional costs such as taxes
Depending on whether your lender considers that you meet their affordability criteria, you may be able to add your stamp duty to your mortgage. Lenders will not permit SDLT to be added directly to the mortgage loan, so what does this mean in practice?
Can I just borrow more to cover the SDLT?
When a lender says you cannot add stamp duty directly to your mortgage, they mean that the stamp duty amount is not included within the main mortgage loan that is secured against the property. In other words, your mortgage is calculated only on the purchase price of the property (for example, £350,000). Stamp Duty Land Tax (SDLT) is treated as a separate cost, not part of the property’s value.
However, some buyers increase their borrowing slightly to cover all purchase-related costs (including SDLT). In this scenario, you are simply borrowing a larger total amount for the property if the loan-to-value (LTV) ratio and affordability tests still fit the lender’s limits.
Why don’t mortgage lenders automatically include SDLT in mortgages?
There are several reasons lenders do not directly include stamp duty within standard mortgage lending:
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The mortgage is secured against the property itself, and taxes are unrelated to that value.
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The Financial Conduct Authority (FCA) requires lenders to test that borrowers can meet repayments under stressed interest-rate scenarios. Adding extra borrowing for tax would increase monthly costs and risk.
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Mortgage providers must ensure that borrowers do not over-extend their credit beyond what the property equity supports.
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If the property decreases in value, adding non-property costs to the loan increases the risk of negative equity.
For these reasons, most lenders expect buyers to cover SDLT from their own funds rather than from the mortgage.
Other ways to cover your SDLT
Other ways to cover the cost of your SDLT include:
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Building funds over time to cover SDLT and other fees
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Contributing a slightly smaller deposit if the LTV ratio allows, using the difference to cover SDLT
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Using personal loans or credit cards. Personal loans may be unsecured and carry higher interest rates. Using a 0% card might offer short-term flexibility, but it should be cleared promptly to avoid charges
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First-time buyers, shared ownership purchasers, and those eligible for multiple dwellings relief may pay less or no SDLT, and
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Saving for SDLT between exchange and completion can help bridge the gap, although sufficient funds must be available by the completion date.
What are the pros and cons of adding stamp duty to a mortgage?
Advantages
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Improves short-term cash flow - reduces the immediate need for savings at completion.
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Simplifies budgeting - combines most home-buying costs into one repayment plan, and
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Enables earlier purchase - may help buyers who have sufficient affordability but limited upfront funds.
Disadvantages
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Higher long-term cost - paying SDLT through a mortgage means paying interest on it for the life of the loan
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Limited lender acceptance - most lenders will not include SDLT directly, and borrowing extra may breach loan-to-value limits or affordability checks.
Final words
It is possible in some cases to include the cost of Stamp Duty Land Tax within your mortgage, but only indirectly. Lenders do not treat SDLT as part of the property’s value, so any additional borrowing must still fit within their loan-to-value limits and affordability checks. Buyers who meet these criteria may be able to borrow slightly more to cover their total purchase costs, including stamp duty. However, this approach increases the overall amount borrowed and the interest paid over time. It is therefore important to speak to both your solicitor and mortgage adviser before the exchange of contracts to confirm what is affordable, what your lender allows, and how best to structure your finances for completion.
Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. Our highly experienced property law team can assist you in relation to mortgages and stamp duty. To make an appointment, please contact us on 01932 840 111.
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FAQs
Can I borrow more from my lender to pay stamp duty?
Possibly, but only if it remains within the lender’s loan-to-value limit and you can afford the repayments. Most lenders do not specifically include SDLT in the mortgage calculation.
Can my solicitor pay stamp duty on my behalf?
Yes, your solicitor will usually pay SDLT to HMRC immediately after completion using the funds you have transferred to their client account.
What happens if I cannot afford to pay stamp duty immediately?
If you do not pay within 14 days of completion, HMRC can charge interest and penalties. It is essential to ensure that SDLT funds are available before exchange or completion.