Can stamp duty be added to my mortgage?

Stamp duty can be a major addition to the cost of purchasing a property, but how is it paid, and can it be added to the overall cost of a mortgage?

When purchasing a property, the cost of the home itself is only part of the picture. It’s important to remember that on top of the purchase price of your property and the interest on your home loan, you’re likely to pay additional costs in the form of fees, taxes and other levies, and stamp duty can be a significant one of these.

What is stamp duty?

Stamp duty, sometimes also known as transfer duty, is a tax that is levied by each Australian state and territory for the purchase of a property. Depending on the circumstances, it can be paid as a flat rate or as a percentage of the transaction. While it is sometimes overlooked by buyers when estimating the overall cost of a home, it can add significantly to the overall cost you’ll end up paying.

Can you add stamp duty to your mortgage?

Stamp duty is generally an upfront cost that must be paid when you purchase a property, within a certain timeframe, typically one to three months. This means that when saving for a property, you should factor in the amount that you will need to pay in stamp duty in addition to the cost of the property, as well as any other pre-purchase expenses such as conveyancing, building and pest reports and other costs.

While you cannot add stamp duty to your mortgage as such, you may be able to ask your lender if it is willing to increase the amount of your home loan to cover the cost of stamp duty.  This could make up for the amount that you will need to pay from your savings.

How do you estimate stamp duty?

There are a number of factors that go into the overall calculation of stamp duty. If you’re curious, Canstar has a stamp duty calculator that will help you estimate how much you might expect to pay on a property, and you’ll need to answer such questions as:

1. Is the property a primary residence or an investment? Generally speaking, investment properties can attract more stamp duty than homes that you plan to live in as your primary residence.
2. Are you a first home buyer? Depending on the state or territory you’re in and the value of the property, first home buyers can sometimes qualify for stamp duty concessions, grants or exemptions.
3. Which state or territory is the property in? The amount of stamp duty you’ll pay for a property, as well as the timeframe in which you will have to pay it, will vary depending on the location and relevant local laws.
4. How much does the property cost? In some cases, stamp duty is calculated as a percentage of the overall cost or market value of a property, meaning it can be higher the more expensive a property is.

Other factors may also influence how much you pay in stamp duty, such as whether you are purchasing both a house and land, or whether you are purchasing land and planning to build a house. There may also be concessions available for certain property transfers which may occur due to things such as death or divorce.

How much do you have to save for stamp duty?

The amount you will have to save for stamp duty depends on your location and circumstances, but we considered the hypothetical example of a homebuyer purchasing a property in Queensland for $800,000. Assuming the buyer plans to use the property as a primary residence, and it is not their first home purchase, then Canstar’s stamp duty calculator estimates that they would need to pay approximately $24,538 in stamp duty.

This hypothetical buyer would therefore need to have this amount saved up in addition to the amount they already have saved for a deposit.

What stamp duty exemptions and concessions are available?

There are various state and territory schemes for stamp duty concessions, which may alleviate some of the costs of stamp duty for people such as first home buyers. For more detailed information on how stamp duty is calculated in each individual state and territory, and what concessions might be available, you can see the list below for information on:

• ACT
• New South Wales
• Northern Territory
• Queensland 
• South Australia 
• Tasmania 
• Vistoria
• Western Australia

Cover image source: StockImageFactory.com/Shutterstock.com