Should I use a bridging loan to save on stamp duty?

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The stamp duty holiday is expected to end on March 31, 2021. The program removed stamp duty on properties up to £ 500,000 has helped keep the housing market vibrant during the coronavirus pandemic. However, mortgage lenders and surveyors continue to catch up with pent-up demand since the market shutdown in the spring. The result is that those who wish to buy a property now may find that they cannot complete their mortgage on time to save their stamp duty.

Those who need to terminate their mortgage quickly should check with their lender or mortgage broker that they can process their application and assessment quickly enough to meet the stamp duty deadline. If there is a risk that this date will not be met, a faster alternative is to secured loan. Recent data has shown that the average number of days to complete loans like these was 13 days in October 2020. The buyer can then proceed with a remortgage Where mortgage and use it to repay the bridging loan.

Generally, bridge the gap and secured loans are available up to a maximum loan-to-value ratio of 70% and only for short periods of months rather than years. Borrowers can contact lenders directly, but many will only work through a loan broker. Borrowers may have to pay a fee for the loan broker’s services and there may be exit fees if they intend to refinance the loan to a mortgage later. The bridging loan interest rate is also likely to be higher than that of a traditional mortgage loan. Buyers can compare the potential stamp duty savings with the interest charges and additional charges. Ultimately, the ability to move quickly can outweigh the additional cost drawbacks.

Use our stamp duty calculator to see what stamp duty you will have to pay before the end of the holiday.

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