Stamp duty can be a high upfront cost. On a £300,000 home, a standard buyer now pays £5,000. If your savings are already stretched covering a deposit, the stamp duty bill on top can feel like a barrier.

No mortgage product lets you add stamp duty as a named item. But it may be possible to borrow more than the purchase price and use the extra funds to cover the cost.

Whether this works depends on your lender, your income, and your loan-to-value (LTV) ratio. This article explains how. If you do need to borrow money to pay your stamp duty, be sure to explain your situation upfront to a professional mortgage broker.

How adding stamp duty to your mortgage works

Borrowing more than the property purchase price

Lenders don’t offer a specific stamp duty add-on. What some buyers do instead is borrow more than the property price and use the extra to cover costs, including stamp duty.

For example, if a home costs £250,000 and stamp duty is £2,500, a buyer might apply for a £252,500 mortgage. The lender assesses the loan amount against the property’s value and the buyer’s affordability. If they approve it, the buyer has the funds to cover the tax on top of the purchase.

Not all lenders allow borrowing above the purchase price. Those who do will still apply their standard checks. The extra borrowing isn’t free money. It adds to the total debt and the monthly cost.

How loan-to-value affects borrowing

When you borrow more than the purchase price, your LTV ratio goes up. A higher LTV means the lender is taking on more risk. This can push you into a higher rate band or limit your choice of products.

For example, if you have a 10% deposit on a £250,000 home, your standard LTV is 90%. If you borrow an extra £2,500 for stamp duty, your LTV becomes 91%. That could move you into a higher rate tier with some lenders.

Understanding how LTV works and how to calculate it is important before you decide.

Can all lenders allow stamp duty to be added to a mortgage?

Affordability and lending criteria

Lenders assess any application on affordability. If you want to borrow more than the purchase price, they must be satisfied that you can afford the higher monthly payments. They check your income, your outgoings, and whether you pass their stress tests.

Some lenders will only lend up to the property’s value. Others will consider applications above it but apply stricter checks. There is no standard rule across the market.

Why some lenders may not allow it

The main reasons lenders decline to lend above the purchase price are LTV limits and risk. If the property market falls and your LTV is already at or above 100%, the lender has no buffer.

For most buyers with a small deposit, borrowing above the purchase price may simply not be possible. The LTV would be too high for most lenders to accept. Knowing how LTV affects your mortgage options helps you.

What are the pros and cons of adding stamp duty to a mortgage?

Lower upfront costs

The main benefit is straightforward. If you don’t have the cash to cover stamp duty upfront, borrowing it through your mortgage lets you complete the purchase. You pay over time rather than finding a lump sum now.

For buyers who have saved for a deposit, this can be the difference between buying and waiting another year.

Paying interest over the mortgage term

The downside is that you pay interest on the stamp duty amount for the life of the mortgage. On a 25-year term, even a relatively small extra amount can cost more in interest than the original stamp duty bill.

For example, borrowing an extra £2,500 at a 4.5% rate over 25 years adds roughly £1,600 in interest. The total cost of that stamp duty becomes around £4,100, not £2,500.

Impact on mortgage rates and monthly repayments

Borrowing more raises your LTV. A higher LTV can mean a higher rate. This affects every pound you borrow, not just the stamp duty portion. The overall impact on your monthly payments and total cost may be larger than it first appears.

Compare the true cost against alternatives before you make a decision.

Can first-time buyers add stamp duty to their mortgage?

If your purchase is under £300,000, you pay no stamp duty as an FTB.

Between £300,001 and £500,000, the rate is 5%. On a £350,000 home, that is £2,500.

Above £500,000, standard rates apply with no relief.

For many first-time buyers, this makes the bill manageable from savings rather than requiring extra borrowing.

What alternatives are there to adding stamp duty to your mortgage?

Using savings or gifted deposits

If family members can contribute a gift towards your purchase costs, this is often the cleanest solution. Gifted funds used towards stamp duty don’t add to your loan. They don’t affect your LTV or your rate. Many lenders accept gifted deposits, though they ask for a signed letter confirming the funds are a gift and not a loan.

Reducing your loan amount or property budget

If borrowing more isn’t possible and you don’t have cash for stamp duty, it may be worth adjusting your budget. Buying at a lower price can reduce or eliminate the stamp duty bill. On a £125,000 purchase, a standard buyer pays no stamp duty at all under current rates.

FAQs

Can you add solicitor fees to your mortgage?

In the same way as stamp duty, there is no product that adds solicitor fees as a named item. Some buyers borrow slightly above the purchase price to cover legal fees, but this depends entirely on the lender accepting a higher LTV and the buyer passing affordability checks. Most buyers pay legal fees separately from savings.

Can you add stamp duty to a second home mortgage?

The same logic applies. If a lender allows borrowing above the purchase price, the funds can be used for any purpose, including stamp duty. But second home buyers pay a 5% surcharge on top of standard rates from the first pound. On a £300,000 second home, stamp duty is £20,000. This is a large sum and is unlikely to be absorbed by a small amount of extra borrowing.

Is it cheaper to pay stamp duty upfront?

Almost always yes, if you have the funds. Paying upfront means no interest. Adding it to your mortgage means paying interest on that amount for years. If you have savings that can cover the stamp duty, using them is likely to be the cheaper option overall.

Final thoughts

Adding stamp duty to a mortgage is possible in some cases, but it’s not a standard feature. It depends on the lender’s policy, your LTV, and your ability to afford the higher loan amount. It also costs more in the long run than paying upfront.

If you’re unsure how to manage the costs of buying a property, a specialist broker can look at your circumstances and tell you what options are available. Pepper Money works with experienced brokers who help buyers at every stage of the process. You can find a broker through us today and speak with professionals who can give you specific advice based on your situation.

This article is for general information only. It is not financial or tax advice. Always speak to a qualified adviser before making any decisions.