Buying your first property in the UK comes with many costs. Stamp duty is one of the biggest expenses you’ll face, but many buyers don’t understand how it works or whether they need to pay it at all.
This guide breaks down everything you need to know about stamp duty, plus the other essential questions about mortgages, deposits, and the buying process. Let’s get straight into it.
What is Stamp Duty and Do I Have to Pay It
1. What is Stamp Duty?
Stamp duty (officially called Stamp Duty Land Tax or SDLT) is a tax you pay when you buy a property in England and Northern Ireland. Scotland has its own version called Land and Buildings Transaction Tax, while Wales uses Land Transaction Tax.
The government collects this tax on property purchases above certain thresholds. You pay different rates depending on the property price, with higher portions of the price taxed at higher rates.
Think of it like income tax brackets. You don’t pay the top rate on the entire purchase price. You pay different rates on different portions of the price.
2. Do I Have to Pay Stamp Duty?
Not everyone pays stamp duty. Whether you pay depends on three main factors:
Your buyer status. First-time buyers get significant relief. If you’ve never owned property before (anywhere in the world), you qualify for first-time buyer relief.
The property price. First-time buyers pay no stamp duty on properties up to £425,000. You only pay 5% on the portion between £425,001 and £625,000. Above £625,000, you pay the standard rates and lose first-time buyer benefits.
Standard buyers. If you’re not a first-time buyer, you pay nothing on the first £250,000, then tiered rates above that threshold.
Here’s how the rates work for standard buyers in 2025:
- £0 to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
Example: You buy a £400,000 property as a standard buyer. You pay nothing on the first £250,000, then 5% on the remaining £150,000. That’s £7,500 in stamp duty.
3. Additional Stamp Duty for Second Homes
Buying a second property or buy-to-let investment? You’ll pay an extra 3% on top of the standard rates. This surcharge applies to the entire purchase price, not just the portion above the threshold.
A £300,000 second home costs you £15,000 in stamp duty instead of £2,500. That’s a substantial difference you need to budget for.
4. How Much Deposit Do You Need?
Most lenders require a minimum 5-10% deposit. However, the size of your deposit directly affects your mortgage rate. Larger deposits unlock better interest rates and save you thousands over the mortgage term.
Deposit size and rates:
- 5% deposit (95% LTV): Highest interest rates, limited lender options
- 10% deposit (90% LTV): More competitive rates, wider lender choice
- 15% deposit (85% LTV): Better rates start appearing
- 20% deposit (80% LTV): Significant rate improvements
- 25-40% deposit (60-75% LTV): Best rates available
Example rates: A 95% LTV mortgage might charge 5.5% interest, while an 80% LTV mortgage offers 4.2%. On a £250,000 mortgage over 25 years, that’s a difference of £230 per month or £69,000 over the full term.
Save more deposit if possible. The rate improvements often outweigh the wait time.
5. How Much Can You Borrow for a Mortgage?
Lenders typically offer 4 to 4.5 times your annual gross income. Some specialist lenders go up to 5.5 times for high earners or certain professions.
Income multiples by lender type:
- High street banks: 4 to 4.5 times salary
- Building societies: 4 to 4.5 times salary
- Specialist lenders: Up to 5.5 times salary
Your actual borrowing amount depends on several factors beyond income. Lenders assess your monthly outgoings, credit commitments, and regular expenses. They stress test your affordability against higher interest rates to ensure you can still afford payments if rates rise.
Joint applications. Applying with a partner or family member increases borrowing power. Most lenders use combined income, though some cap the second applicant’s income at a lower multiple.
Self-employed applicants. You’ll typically need 2-3 years of accounts or SA302 tax calculations. Lenders use average income across these years, not your latest year alone.
6. Understanding Mortgage Arrangement Fees
Mortgage arrangement fees (also called product fees or booking fees) are charges lenders apply to set up your mortgage. These fees range from £0 to £2,000, with some specialist mortgages charging even more.
Fee structures:
- No fee mortgages: Higher interest rates compensate for the missing upfront fee
- Low fee mortgages (£500-£1,000): Balanced option for many buyers
- High fee mortgages (£1,500-£2,000): Usually attached to the lowest interest rates
You can pay fees upfront or add them to your mortgage balance. Adding fees means you pay interest on them for the full mortgage term. A £1,000 fee added to your mortgage costs roughly £1,600 over 25 years at 4% interest.
Calculate the total cost over your fixed period. A mortgage with no fee at 4.5% might cost more than a £999 fee mortgage at 4.2% over two years.
7. Can You Overpay Your Mortgage?
Yes, most mortgages allow overpayments, but rules and limits apply. Standard mortgages permit 10% overpayments per year without penalty. Pay more than this limit and you’ll face early repayment charges.
Overpayment benefits:
- Reduce your mortgage term by years
- Save thousands in interest payments
- Build equity faster in your property
- Gain flexibility for future remortgaging
Example: You have a £200,000 mortgage at 4% over 25 years. Your monthly payment is £1,056. Add just £100 per month in overpayments and you’ll clear the mortgage 4 years earlier, saving £22,000 in interest.
Check your specific mortgage terms. Some lenders restrict when you can overpay or require minimum overpayment amounts. Others let you take payment holidays if you’ve overpaid.
Early repayment charges. These typically apply during fixed or discounted rate periods. Charges range from 1% to 5% of the amount overpaid beyond your allowance. Once you move to the standard variable rate, overpayment restrictions usually disappear.
8. How Long Does the Mortgage Application Process Take?
The full mortgage process from application to completion typically takes 8-12 weeks. This includes several stages, each with its own timeline.
Mortgage in principle (1-2 days). This initial approval gives you a borrowing estimate based on basic information. It’s not a guarantee but shows sellers you’re serious.
Full mortgage application (1-2 weeks). After finding a property, you submit your full application with all supporting documents. Lenders verify your income, check your credit history, and assess affordability.
Property valuation (1-2 weeks). The lender arranges a basic valuation to confirm the property is worth the purchase price. This isn’t a detailed survey.
Mortgage offer (1-2 weeks). Once the lender approves everything, they issue a formal mortgage offer. This is legally binding and typically valid for 6 months.
Legal work and completion (4-8 weeks). Your solicitor handles searches, contracts, and the final transfer. This stage runs parallel to the mortgage process.
Factors that speed things up:
- Having all documents ready (payslips, bank statements, ID)
- Clean credit history with no surprises
- Straightforward property without issues
- Responsive solicitors and estate agents
Factors that slow things down:
- Self-employed income requiring extra checks
- Credit issues needing explanation
- Complex property types (ex-council, new builds, flats)
- Missing documentation or slow responses
9. What is a Mortgage Valuation and Do You Need a Survey?
A mortgage valuation is a basic check the lender arranges to confirm the property is worth what you’re paying. This protects the lender, not you. The valuation costs £250-£500 and you usually pay for it.
The valuation isn’t detailed. The surveyor does a brief visual inspection, checking for major structural issues or problems affecting the property’s value. They don’t open cupboards, check behind furniture, or investigate thoroughly.
Should you get a separate survey?
Yes, in most cases. A proper survey protects your investment by uncovering issues before you commit to the purchase.
Survey types:
RICS Home Survey Level 1 (formerly Condition Report): £250-£500. Basic traffic light system identifying urgent issues. Suitable for new builds or modern properties in good condition.
RICS Home Survey Level 2 (formerly HomeBuyer Report): £400-£900. More detailed inspection covering condition, urgent repairs, and potential issues. Best for conventional properties built after 1900 in reasonable condition.
RICS Home Survey Level 3 (formerly Building Survey): £600-£1,500. Comprehensive survey with detailed analysis of construction, condition, and defects. Essential for older properties, unusual constructions, or properties needing renovation.
When surveys save money. A £700 survey revealing £15,000 of underpinning work needed gives you negotiating power. You can reduce your offer, ask the seller to fix issues, or walk away entirely.
Many buyers skip surveys to save money. This is risky. Structural issues, damp, electrical problems, or roof damage can cost tens of thousands to fix.
10. Do You Need a Mortgage Broker?
No, you don’t need a broker, but using one often saves time and money. Brokers access the entire mortgage market, including exclusive deals not available directly to consumers.
Benefits of using a broker:
- Access to 90+ lenders instead of researching yourself
- Exclusive rates and products unavailable direct
- Expert knowledge of lender criteria and preferences
- Help with complex situations (self-employed, credit issues, high LTV)
- Application management and paperwork handling
- No upfront cost with many brokers
Broker fee structures:
Some brokers charge no fee, earning commission from the lender instead. Others charge £300-£800 but may access better rates that offset their fee. A few charge percentage-based fees, typically 0.5-1% of the loan amount.
When brokers are especially valuable:
- First-time buyers unfamiliar with the process
- Self-employed applicants with complex income
- Anyone with credit issues or past financial problems
- High loan-to-value mortgages (90-95%)
- Time-poor professionals who want expert handling
DIY approach. You can research and apply directly if you have straightforward income, clean credit, and time to compare deals. Comparison websites show many rates, though not all lenders appear on these platforms.
11. Fixed vs Variable Rate Mortgages
Choosing between fixed and variable rates affects your monthly payments and long-term costs.
Fixed rate mortgages. Your interest rate stays the same for a set period (typically 2, 3, 5, or 10 years). Your monthly payment never changes during this time, regardless of Bank of England base rate movements.
Advantages: Payment certainty makes budgeting easier. Protection if interest rates rise. Peace of mind for 2-10 years.
Disadvantages: You won’t benefit if rates fall. Early repayment charges apply if you want to leave early. Rates are typically higher than initial variable rates.
Variable rate mortgages. Your rate can change at any time. Several types exist:
Standard variable rate (SVR): The lender’s default rate, typically 7-8%. You move to this when fixed deals end. Usually expensive.
Tracker mortgages: Track the Bank of England base rate plus a set percentage (e.g., base rate + 1.5%). If the base rate rises, so does your rate.
Discount mortgages: A discount off the lender’s SVR for a set period (e.g., SVR minus 1% for 2 years).
Variable rates suit people who expect rates to fall or can afford payment increases. Fixed rates suit those who want certainty and stable budgeting.
12. Calculating Your Total Moving Costs
Stamp duty is just one cost. Budget for these additional expenses:
- Stamp duty: £0 to £15,000+ depending on price and buyer status
- Mortgage arrangement fee: £0 to £2,000
- Valuation fee: £250 to £500
- Survey: £250 to £1,500 depending on type
- Solicitor fees: £850 to £1,500 plus disbursements
- Searches: £250 to £400 (part of legal costs)
- Removal costs: £300 to £1,200
- Buildings insurance: £200 to £500 annually
- Estate agent fees: Usually paid by seller, not buyer
Example total costs for a £350,000 property:
- Deposit (10%): £35,000
- Stamp duty (first-time buyer): £0
- Stamp duty (standard buyer): £5,000
- Mortgage arrangement fee: £999
- Survey (Level 2): £650
- Solicitor: £1,200
- Removals: £600
- Insurance: £300
Total: £43,749 (first-time buyer) or £48,749 (standard buyer)
Budget an extra 2-3% of the purchase price on top of your deposit to cover all moving costs.
13. Government Help for First-Time Buyers
Several schemes help first-time buyers get on the property ladder:
Lifetime ISA. Save up to £4,000 per year and the government adds a 25% bonus (£1,000 maximum annually). You can use this for a first property deposit worth up to £450,000. You must be 18-39 to open one and can save until age 50.
Shared ownership. Buy a share (25-75%) of a property and pay rent on the remaining portion. You need a smaller deposit based only on your share. You can buy more shares later (staircasing) until you own 100%.
First Homes scheme. Buy a new build at 30-50% discount in designated areas. Income caps apply (£80,000 or £90,000 in London). You must be a first-time buyer or existing shared ownership customer.
Guarantor mortgages. A family member guarantees your mortgage, letting you borrow more or with a smaller deposit. The guarantor’s property or savings act as security.
Each scheme has specific eligibility rules and limitations. Research thoroughly before committing.
14. Improving Your Mortgage Application
Strengthen your application before applying:
Check your credit report 3-6 months ahead. Register on the electoral roll at your current address. Correct any errors on your report. Avoid applying for credit in the months before your mortgage application.
Save a larger deposit. Every extra percentage point reduces your interest rate. Going from 10% to 15% deposit can cut your rate by 0.3-0.5%.
Reduce existing debts. Pay off credit cards, personal loans, and car finance where possible. Lenders assess your debt-to-income ratio. Lower debts mean higher borrowing capacity.
Show stable employment. Lenders prefer 6-12 months in your current job, though exceptions exist. Frequent job changes raise concerns. Stay in your role if a mortgage application is imminent.
Build a savings buffer. Having 3-6 months of expenses saved after your deposit shows financial responsibility and resilience.
Final Thoughts on Stamp Duty and Mortgages
Understanding stamp duty and the mortgage process helps you budget accurately and avoid surprises. First-time buyers get substantial stamp duty relief, potentially saving tens of thousands compared to standard buyers.
Your deposit size directly affects your interest rate and monthly payments. Larger deposits unlock better rates that save you significantly over the mortgage term.
Take time to understand mortgage arrangement fees, overpayment options, and whether you need a broker. Each decision affects your total costs over 2-25 years.
Get a proper survey, not just the lender’s basic valuation. Spending £500-£1,000 on a survey can save you from buying a property with £20,000 of hidden problems.
The mortgage application process takes 8-12 weeks on average. Start gathering documents early and respond quickly to lender requests to avoid delays.
Whether you’re a first-time buyer or moving home, understanding these fundamentals puts you in control of the process and helps you make better financial decisions for your future.