Lots of homeowners choose to remortgage, whether it’s to move to a new property, release equity from their home or to benefit from a mortgage on their current property with a better interest rate or more suitable features. If you’re considering remortgaging for any reason, you might be wondering if there will be any extra fees to consider. For example, you may be asking, ‘is stamp duty payable on a remortgage?’. The answer depends on several factors.
The main factor is whether you are remortgaging when moving house and buying a new property, or whether you are switching to a different mortgage on your current home. If you are buying a new property or piece of land, you will likely need to pay stamp duty. However, this is not always the case.
In this article, we will look at stamp duty in more detail and whether you will need to add this cost into your remortgaging process.
Stamp duty, officially called Stamp Duty Land Tax (or SDLT), is a tax paid when you buy property or land over a certain price. The amount you pay is worked out according to the purchase price of the property or land and how far above the threshold it is valued at. You will pay a percentage of the amount the property or land is above the threshold. So, for example, if your new property is £20,000 above the threshold, you would pay stamp duty on that £20,000.
Recently, there has been a stamp duty holiday, which has meant the threshold above which you have to pay stamp duty has changed over the past year. The scheme is coming to an end now and being phased out but it may still affect your remortgage. For more information on the stamp duty holiday and whether this will impact you, read our latest article about it here. Or, to find out how much you will pay in stamp duty, use our online stamp duty calculator.
find me a mortgageThe majority of buyers in the UK have to pay stamp duty on a house or land they purchase if it is valued over the threshold set by the government. From 1st October 2021, the threshold is £125,000. For first-time buyers, the threshold is £300,000. You do not have to pay stamp duty if you purchase a property below the value of the threshold. The recent stamp duty holiday that temporarily raised the level of this threshold for non-first-time buyers is being phased out, speak to your adviser to find out more. The majority of first-time buyers also do not have to pay stamp duty because the threshold at which they have to pay the tax is higher than previous homeowners; however, if you are remortgaging, you won’t come under the category of first-time buyer.
Contractors do have to pay stamp duty if they are buying a property above the value threshold and are not first-time buyers. There are no exemptions based on your profession and the threshold for paying stamp duty depends on the value of the property or land, not on the circumstances of the buyer.
Remortgaging is a process many homeowners choose to go through, either when moving house or to change their mortgage product, for example, if they’ve come to the end of their initial, fixed term. You might choose to remortgage if you feel you can find a better mortgage product than your existing loan, for example, if another lender is offering a lower interest rate. Alternatively, you might be interested in remortgaging because you’re hoping to release equity from your home to use for renovations, holidays or retirement. However, before deciding to remortgage with another lender, it’s a good idea to speak to an experienced mortgage adviser to see what options are out there and find the best one for your situation.
You don’t necessarily have to remortgage if you are moving house. Some lenders will let you ‘port’ or move your mortgage to the next property.
Whether you have to pay stamp duty when remortgaging depends on whether you are also purchasing a property as part of the process.
If you are buying a new property and remortgaging in the process, you will have to pay stamp duty if your new property has a value higher than the threshold. The amount you pay depends on the value of the property or land you’re purchasing, but it is usually a percentage of the amount over the threshold. It can cost thousands, so it’s important to factor this cost in when considering your move.
If you are remortgaging without buying a new home, and are simply switching to a new mortgage on your current property, you won’t have to pay stamp duty. This is because stamp duty is a tax you only pay when you purchase a new property or piece of land. So, if you’re staying put, you don’t have to worry.
You might be looking to remortgage because you want to release some equity from your home to use for retirement, supporting your children financially or renovate your house. Alternatively, many homeowners choose to remortgage when they come to the end of their fixed term to avoid moving across to their lender’s Standard Variable Rate (SVR), which is usually much higher than the interest rate you pay during the initial term. Some homeowners may not even wait until the end of this term, opting to remortgage if there is a mortgage product more suitable to their needs.
We hope that after reading our article, you now have a clear answer to the question ‘is stamp duty payable on a remortgage?’, but if you’d like to discuss the matter more, please don’t hesitate to get in touch with one of our advisers.
Contact UsAs a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments.
Sources:
Stamp Duty Land Tax: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
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