Broker guide
Can Stamp Duty Be Added to a Mortgage?
Can the client borrow stamp duty and conveyancing costs? Check total funds, the lender’s valuation, LVR limits and whether enough cash remains to settle.
- Published
- Updated
Yes, stamp duty can be funded through a larger mortgage if the lender approves enough borrowing and the available loan proceeds cover the purchase costs. The loan must still meet the lender’s valuation and repayment requirements. If the approved loan and usable equity fall short, you need cash or another accepted funding source for the difference.
Borrowing More Does Not Remove the Duty
Borrowing to pay stamp duty changes where the payment comes from. It does not reduce the duty or transfer the buyer’s obligation to the lender. Stamp duty, also called transfer duty, is a state or territory charge on the transaction.
NAB’s stamp duty explanation says a lender can allow extra borrowing to cover duty, depending on the deposit, borrowing power and eligibility. That extra borrowing also attracts interest over the loan term.
The same funding calculation applies to conveyancing fees. If your approved borrowing leaves enough loan proceeds after the purchase balance and other deductions, those proceeds can help meet costs. The conveyancer’s fee remains a separate expense in the settlement calculation.
Two limits decide how much the mortgage can contribute. The borrower must be able to meet the repayments, and the loan must fit the lender’s permitted loan-to-value ratio (LVR). LVR compares the loan amount with the property value the lender uses.
A product’s maximum LVR is a ceiling, not a promise to lend that amount. For example, NAB’s Base Variable Rate Home Loan advertises borrowing up to 95% of property value for owner-occupiers making principal and interest repayments. That product figure does not automatically provide the deposit or purchase costs.
A larger approved loan can reduce the cash contribution needed to complete the purchase. It can also increase interest costs and trigger lenders mortgage insurance (LMI), depending on the loan and any applicable scheme. Keep the insurance premium separate from the cash proceeds available for settlement.
Valuation, LVR and Funds to Complete
Use the lender’s accepted property value and the approved loan amount to calculate the cash needed for settlement. Keep purchase costs separate from the price. A duty allowance does not increase the property’s value for lending purposes.
Consider this hypothetical purchase. Assume the lender caps this application at 80% LVR and uses a valuation below the purchase price. The cost allowances are illustrative amounts, not a state duty calculation or a conveyancing quote.
| Item | Hypothetical amount | Treatment |
|---|---|---|
| Contract purchase price | $650,000 | Amount payable for the property |
| Lender’s accepted valuation | $625,000 | Value used for this lending calculation |
| Approved mortgage | $500,000 | 80% of the accepted valuation |
| Transfer duty allowance | $26,000 | Separate purchase cost |
| Conveyancing allowance | $3,000 | Separate purchase cost |
| Other costs and adjustments | $1,000 | Separate purchase cost |
| Total price and costs | $680,000 | $650,000 plus $30,000 |
| Cash contribution required | $180,000 | $680,000 less the $500,000 mortgage |
If the lender had accepted the $650,000 purchase price as its value, an 80% loan would have been $520,000. The lower valuation reduces borrowing by $20,000. The buyer still owes the contractual price.
Now assume the buyer has $165,000 in total cash and has already paid a $65,000 deposit from it. The deposit reduces the purchase balance to $585,000, leaving $100,000 cash available. Add the $30,000 costs and the settlement requirement is $615,000.
The $500,000 mortgage plus the remaining $100,000 cash supplies $600,000. The buyer is $15,000 short, even though the contract deposit has been paid. Counting the deposit again as available cash would hide that shortfall.
Run the full calculation in the funding position calculator with the deposit already paid recorded separately. If lender fees or an insurance premium are deducted from the approved amount, reduce usable loan proceeds by those deductions.
Equity, Gifts and Other Funding Sources
Existing property equity, cash savings and a documented gift can contribute to purchase costs when the lender accepts the source. Each needs different evidence. Borrowed funds also create repayments that the lender must assess.
NAB’s guide to using equity explains that usable equity is less than the property’s total equity. Access usually involves a loan top-up or refinancing, and the borrower must afford the additional debt.
For its home loan top-up route, NAB describes increasing the loan up to 80% of the property’s value, subject to equity and financial circumstances. Most variable home loans can be eligible, with assessment of the higher repayments. This is a different limit from the advertised maximum for a new purchase loan.
Treat equity release as a separate approval in the funding schedule. Record the purpose, net amount available and when the funds can be used. Equity shown in an estimate cannot pay a settlement bill until the borrowing has been approved and made available.
For cash savings, retain statements showing ownership and the available balance. Separate funds already spent on the deposit or inspections from money still available. Money earmarked for another obligation cannot also meet the settlement contribution.
A gift needs evidence that it is non-repayable. Bankwest’s Gifted Funds Declaration requires the donor to confirm that condition and says the funds must be available before settlement. The form also allows Bankwest to request evidence of the gift.
A gift and a loan from family need different treatment. If repayment is expected, disclose the arrangement as debt. Likewise, do not assume a personal loan is an accepted deposit source: show the proposed lender where it comes from and include its repayment in the assessment.
Having cash available and meeting a lender’s genuine-savings requirement are separate questions. Apply the chosen loan’s evidence rules to the source, even when the bank balance is enough to complete the purchase.
Concessions and Final Settlement Figures
A duty concession reduces the amount charged, while financed duty leaves the charge payable and funds it with debt. Apply the concession the buyer qualifies for before finalising the contribution needed. A grant or future refund needs its own payment timing in the funding statement.
For example, Western Australia’s first home owner duty rules link eligibility to the buyer’s circumstances and the transaction’s value. The applicable rates depend on when the agreement is entered into. Use the official rules for that transaction instead of assuming all first-home purchases receive the same reduction.
The WA guidance also addresses a settlement timing problem. Without grant approval or duty-rate pre-approval before settlement, duty is assessed at the general rate and must be paid at or before settlement. A later reassessment and refund does not supply money for an earlier settlement.
Keep the lender’s valuation separate from the revenue office’s dutiable value. WA’s transfer duty assessment guidance generally uses consideration, but uses unencumbered value when it exceeds consideration or the stated exceptions apply. A lower bank valuation therefore does not automatically reduce duty.
Use the stamp duty calculator for an estimate, then reconcile the charge with the relevant revenue office and conveyancer. For other states and territories, Moneysmart’s home-buying guide links to the official duty calculators.
Before settlement, replace allowances with the assessed duty, conveyancing invoice and final adjustments.
Confirm the net loan proceeds and cleared cash. Subtract the amount still payable and resolve any shortfall before funds are required. Count a concession, grant or refund only in the amount and timing actually available for that settlement.
