What is mortgage stamp duty?
If you are buying a property in NSW, it is important to check whether you will need to pay Stamp Duty or not as it may affect the amount you can afford to borrow.
For most people who borrow money to purchase a property or to refinance their existing home or investment loan - they don't have to pay stamp duty on the mortgage.
However, surprisingly in NSW not all mortgage stamp duty has been abolished — although there seems to be plans for this to happen on 1 July, 2013. But until any new legislation gets effected, there is a narrow band of borrowers and loans that it is still levied on.
Beware the company borrower! If the borrower is not an individual then mortgage stamp duty is payable so any NSW company/trust mortgages may incur this duty. For purchases it will be on the full loan amount (ouch!). On refinances, the company / trust may be eligible for a credit of duty already paid when the loan was first taken out.
Now for individual borrowers, if the primary loan purpose (more than 50% of the loan amount) falls outside any of the criteria below, then be warned - mortgage stamp duty may be levied.
- to buy or build a residential property
- to buy residential vacant land
- to carry out additions/alterations/renovations to a residential property
- to repay an existing mortgage held with another lender
It is definitely a good idea to check this with your solicitor or the NSW Office of State Revenue. But if you looking to borrow against an unencumbered property in NSW to purchase shares you might want to first understand the mortgage stamp duty implications.
