Can you add stamp duty to your mortgage?
Stamp duty is an upfront cost that must be paid on or before settlement day. That is, the day you officially take ownership of the property.
Stamp duty can add up to tens of thousands of dollars, often making it the most expensive part of a property transaction aside from the actual purchase price. However, you don’t necessarily have to pay it in cash. You may be able to ask your lender to increase the balance of your home loan to cover the cost of stamp duty, rather than using your savings.
But by adding the cost of stamp duty to your mortgage, you’ll have to pay interest on this amount, potentially over your mortgage’s full term, which could be decades. This could mean paying much more in total over the long run.
What is stamp duty?
Stamp duty or transfer duty is a tax levied by Australian states and territories on property purchases.
How much duty you might need to pay is generally based on the value of the transaction.
How do you estimate stamp duty?
You may be able to get a better idea of how much you may pay in stamp duty by answering the following questions:
- Which state or territory is the property in? The amount of stamp duty you’ll pay, as well as the timeframe in which you will have to pay it, will vary depending on the location.
- How much does the property cost? Stamp duty is normally based on a property’s cost or market value, meaning it can be higher for more expensive properties.
- Is the property a primary residence or an investment? Investment properties often attract more stamp duty than homes.
- Are you a first home buyer? First home buyers can sometimes qualify for stamp duty concessions or exemptions.
- Are you a temporary resident or foreigner? Non-Australians purchasing a property may incur an additional surcharge (expressed as a percentage of their stake in the property). The percentage value of the surcharge will vary between states and territories.
Other factors that may influence how much you pay in stamp duty include whether you’re purchasing an existing property (both the house and the land under it) or just buying land on which you plan to build a house.
There may also be concessions available for certain property transfers, such as those that occur due to death (deceased estate transfer) or divorce (separation transfers).
Canstar’s stamp duty calculator can help you estimate how much you might expect to pay on a property.
How much do you have to save for stamp duty?
You don’t necessarily have to save for stamp duty, as the cost can generally be added to the value of your mortgage. The amount you might have to pay will depend on:
- The value of the property
- The state your property is located in
- Whether you’re eligible for any concessions
Consider a 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, Canstar’s stamp duty calculator estimates that they would need to pay approximately $21,850 in stamp duty.
What stamp duty exemptions and concessions are available?
Various states and territories offer various stamp duty concessions, which may help to alleviate some of the cost for the likes of first home buyers, downsizers, and pensioners.
For more detailed information on how stamp duty is calculated, you can visit Canstar’s guide on stamp duty.
