How do you pay for stamp duty?

[GorgeousLadyofWrestling]

A few threads about stamp duty made me realise I’m clueless about it. How do you go about getting the money for it, other than saving for it? Is it possible to kind of mentally compartmentalise it from any equity of the property you’re selling and use it to pay after you’ve got the proceeds from that sale?

We’ve literally just bought as FTB but will outgrow this property in a four or five years due to DS sharing with his two younger DDs and will really need his privacy, so I’m just trying to figure out if we should start saving now.

Feels like an endless treadmill of saving - saving for mortgage deposit or saving for stamp duty. I guess it is a gamble to rely on equity but in our case, we’re in London and bought well under market value in an estate of identical maisonettes because ours needed renovating, by at least 80k so I’m hopeful in five years or so, things have settled and we’ll have some equity. Could really do with using disposable income in the meantime to ACTUALLY renovate 😂🤷🏻‍♀️

You pay for it with cash, either savings or equity

You can pay for it however you like, but it is done through your solicitor at the time of exchange. As an example with fantasy figures, your current house has an existing mortgage of £300K, you sell it for £450K, buy a new house at £600K you have £150K equity from your sale, at current rates £20K stamp duty would be payable, so you can take that off the £150K and use £130K as deposit (plus any relevant savings) for your new mortgage

Ahhh ok cool, so it’s all kind of done without you having to actually do anything?

I’m going to try and save a little bit to be honest, we’ve been saving constantly and have finally bought our first property - kind of wanted to enjoy life a bit for a while.

As others have said, providing you have enough equity/mortgage to cover both the cost of new purchase and the stamp duty/fees you need to pay, then you don't need to give any extra in cash savings. So for instance, you sell your house for £200k with £50k being equity, you buy your next house for £300k, and get a mortgage for £260k, you have £10k 'spare' to pay your stamp duty, fees and removal costs. But if your maximum available mortgage was £250k you'd need to find that £10k from savings...

Understand your desire to live a little and get your renovations done, that makes sense, but do bear in mind that the more equity you need to use towards stamp duty etc, the more you will need to borrow to fund your next purchase and even a small amount of extra borrowing will cost you significantly more in interest over the term of the mortgage. I know it sounds obvious but so many people I know who would be super careful about other forms of credit such as credit cards, loans etc don't seem to view a mortgage as borrowing/something which incurs interest and merrily take out the absolute maximum mortgage they can without actually considering how much that is costing them in terms of interest repayments, when in a lot of ways a mortgage is just a very large loan/credit card!

So do try and continue to save as much as you can within a reasonable lifestyle, renovations are a good use of your money/investment, so long as they add commensurate value to the house - just be careful not to go OTT if you aren't planning on staying there long term. Things like adding a high end kitchen or bathroom suite or expensive appliances may be worth it if it's your long term home but you will rarely get a return on your investment when selling (in an 'average' house/area that is)... your money would be better placed either in cash savings or overpaying your current mortgage, as you will then have more capital available for your long-term home!

The first house we bought (well the first one I bought) we saved the SD separately and it was painful. This time, we released equity from our old house to do work on this one, so we didn’t actually hand over the money for SD (although we did have it in savings).

@maxelly that’s really great advice, thank you. I’ve read that before, a about how much rennovations add in terms of return. Our property hadn’t been updated since it was built in the 60’s so we’ve spent a few thousand on double glazing - the single pane old windows looked like they might fall out with a strong gust of wind! 🙈

The bathroom has no floor, or shower plumbed in, and a REALLY old suite so I think a little TLC in terms of plain/ cheap ish bathroom suite, new floor and shower is sufficient.

Kitchen could do with modernising - it’s very old and scruffy. So again, simple and economy-version approach just to make it nice, clean and modern. Enjoyable to live in for a few years but really not spending ££££.

But definitely yeah - if this was our forever home, I’d be spending ages picking out beautiful furnishings but we just won’t be here long enough to enjoy them. Our renovations are very much a balance of modernising but also keeping an eye on resale.

All fee etc we paid from the equity/sale of our old house and was all mapped out by our financial advisor so we knew what was going on and solicitor then sent final letter when we were in new house that covered all of this. This included estate agent fee, stamp duty, paying mortgage fee to get released from old mortgage and rest of solicitor fees. We paid financial advisor up front and solicitor a deposit (I think from memory!)