Inlcuding stamp duty in loan?
- Thread starter Munchkin
- Start date
Hi,
They add up all the costs, purchase price plus stamp duty etc and subtract the amount of deposit you are going to contribute, which may include the FHOG etc and then loan you the rest. If that loan amount is equal to or less than your afforability/capacity, and equal to or less than the lenders maximum loan to value ratio, then its all good.
If the particular lender/broker/manager is confused, just tell them how much you would like to borrow and that you would like to hold back part of your deposit, enough to cover the stamp duty....
They add up all the costs, purchase price plus stamp duty etc and subtract the amount of deposit you are going to contribute, which may include the FHOG etc and then loan you the rest. If that loan amount is equal to or less than your afforability/capacity, and equal to or less than the lenders maximum loan to value ratio, then its all good.
If the particular lender/broker/manager is confused, just tell them how much you would like to borrow and that you would like to hold back part of your deposit, enough to cover the stamp duty....
Lenders won't really lend you the stamp duty, but it's easy to see why there is the perception that they will. Here's how it works...
Lenders will give you a loan that's based on a percentage of the security value. This might be 80%, 90% or even as high as 97% in a few cases.
They also figure out what the costs of purchasing that property are. Costs include stamp duty, conveyancing costs, adjustments for rates at settlement, mortgage insurance. Lenders will not lend against these costs as they will only lend against the real security (which is essentially the property value).
You can add these costs to the purchase price and you've can call it the total costs. You have to come up with the difference between what the bank will lend you and the total costs.
Say you purchase a property worth $400,000 and we'll assume you're looking for an 80% loan. In Victoria, the additional costs to purchase this property would be about $20,000 (stamp duty, $1k fo conveyancing, adjustments, etc).
Total cost to purchase the property is $420,000.
The loan is for $320,000 (80% of purchase price). The difference is $100,000 which is your contribution to the purchase - 20% deposit + $20k for other purchase costs.
If you're borrowing over 80% the calculation is still the same, except that you've got to add the mortgage insurance into the purchase costs. Often people will simply increase the loan by a little to cover this cost (know as capitalising LMI), but the maximum lenders will allow you to borrow is still defined as a percentage of the purchase price (up to 95% or 97% in most cases).
The only case where a lender will allow you to borrow the purchase costs, is if you give them something to secure that amount against, such as another property.
Lenders will give you a loan that's based on a percentage of the security value. This might be 80%, 90% or even as high as 97% in a few cases.
They also figure out what the costs of purchasing that property are. Costs include stamp duty, conveyancing costs, adjustments for rates at settlement, mortgage insurance. Lenders will not lend against these costs as they will only lend against the real security (which is essentially the property value).
You can add these costs to the purchase price and you've can call it the total costs. You have to come up with the difference between what the bank will lend you and the total costs.
Say you purchase a property worth $400,000 and we'll assume you're looking for an 80% loan. In Victoria, the additional costs to purchase this property would be about $20,000 (stamp duty, $1k fo conveyancing, adjustments, etc).
Total cost to purchase the property is $420,000.
The loan is for $320,000 (80% of purchase price). The difference is $100,000 which is your contribution to the purchase - 20% deposit + $20k for other purchase costs.
If you're borrowing over 80% the calculation is still the same, except that you've got to add the mortgage insurance into the purchase costs. Often people will simply increase the loan by a little to cover this cost (know as capitalising LMI), but the maximum lenders will allow you to borrow is still defined as a percentage of the purchase price (up to 95% or 97% in most cases).
The only case where a lender will allow you to borrow the purchase costs, is if you give them something to secure that amount against, such as another property.
Essentially the bank made you borrow more money because your deposit wasn't large enough for a 90% loan. They didn't really incorporate the stamp duty into the loan, they simply tweeked the loan to match the figures.
What you really had here was enough funds for a 7% deposit and the rest went towards the stamp duty.
If you only had a 5% deposit available, you wouldn't have been able to purchase the property. ANZ won't allow you to borrow more than 95% of the security value.
You should figure out the total cost before figuring out the loan amount, or you might get yourself into trouble.
Stamp duties and other costs are about $13,000, but let's call it $15,000 to have a saftey margin.
Thus total cost to purchase is $315,000.
Figure out what your contribution can be (your deposit to the agent, FHOG, other savings).
The difference is the minimum amount to need to borrow from the bank to purchase the property. You can certainly borrow more if you like (subject to affordabilitly and other lenders criteria).
If you've got $75k in available ($315k - $240k), then you're good for a loan of $240,000. Less than $75k and you'll need a larger loan.
It really is that simple, anything more and you're over thinking it.
Yes that is what I meant. We have already contributed $80K so technically I only NEED $220K for the rest of the actual property amount.
If we borrowed $240K like I asked before then we would actually have 5K left over
I just wasn't sure if they would lend us more than what we actually needed.
find a clean sheet of paper.
draw a line down the centre.
on one side put all the costs, the purchase price, mortgage insurance, solicitor fees, application fees, stamp duty etc etc.
On the other put down any deposit already paid, and savings you would like to contribute, and the loan amount.
Add each of the colums up and put the two totals at the bottom.
It should be the same figure, or something needs to change, more deposit, more loan, etc.
draw a line down the centre.
on one side put all the costs, the purchase price, mortgage insurance, solicitor fees, application fees, stamp duty etc etc.
On the other put down any deposit already paid, and savings you would like to contribute, and the loan amount.
Add each of the colums up and put the two totals at the bottom.
It should be the same figure, or something needs to change, more deposit, more loan, etc.
and I'm the one over thinking it????
There are some seminar presenters that claim to use it as a regular strategy............more so to get the seller to pay for it.
Although it looks like a good strategy to borrow the Stamps, as Pete says you arent borrowing for Stamps per se.
In the 90 % vs 93 % model presented by another poster, the extra 3 % borrowing probably increased the LMI premium by at least 40 %.......something to be aware of
ta
rolf
yes, absolutely LMI is a pain, but we didn't mind it on our first property (PPOR). It was worth the joy. But on our second one (IP), we were more stringent and chose to pay up SD upfront. We would have had to pay $6k more in LMI just to save $13k.5k stamp duty on a $450k property. So, we chose to cough up SD instead.
Just be mindful of timing of when stamps need to be paid. In the ACT for example the stamps need to be paid BEFORE settlement.
In NSW they should also be paid before settlement but if you are to settle where the transfer can be stamped (and the vendor agrees to accept an unstamped transfer up to that point) it can be paid at the settlement from the loan proceeds.
Other states? Not 100% usually can be paid at settlement from what I have experienced. Other brokers would be able to eloborate I'm sure.
If you ate not x colling usually not an issue at any stage.
