Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in and we’ll get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at [email protected].
Question: I’m a first-time buyer about to purchase my first flat. I’ve put an offer down but I’m fairly sure I will miss the deadline to pay a lower amount of stamp duty later in March. Is there any way that I can try and get my purchase completed before the end of the month? A friend mentioned “bridging finance” as a way of doing so?
Answer: For first-time buyers hoping to complete their purchase before the upcoming stamp duty changes in April, it is important to take a realistic view of the home-buying timeline.
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While mortgage applications and property purchases can, in some cases, move quickly, the reality is that completing a purchase within the next few weeks is now highly unlikely, unless you are already well advanced in the process.
For those in the early stages, the deadline is unfortunately too tight to achieve. However, for buyers who are further along, or those considering future purchases with tight time constraints, there are ways to speed up the process – such as bridging finance, as your friend suggests.
The upcoming changes to stamp duty mean that first-time buyers in England who currently benefit from an exemption on properties up to £425,000, and a reduced rate on purchases up to £625,000, will soon face a different tax threshold.
From 1 April, 2025, this will revert to the previous level of £300,000, with a maximum purchase cap of £500,000.
This shift means that those purchasing between £300,000 and £625,000 will face additional stamp duty costs once the changes take effect. For example, a first-time buyer purchasing a £425,000 property today would pay no stamp duty at all, but under the new rules, they would need to pay £6,250.
At the higher end of the scale, a £625,000 purchase would incur a tax liability of £8,750. For buyers stretching their budgets, this can have a significant impact on affordability.
At this stage, anyone who has not yet applied for a mortgage is extremely unlikely to complete before April.
A mortgage application alone can typically take two weeks to be processed and approved, before considering the additional time required for conveyancing, property searches, and legal checks.
For buyers already deep into the process, where contracts are close to exchange, there will still be a possibility of meeting the deadline, but only if all parties involved – solicitors, lenders, and estate agents – are working efficiently to expedite the transaction.
For those who are close to completing but need to speed up the process, or for future buyers looking to act quickly under a tight deadline, bridging finance may be a useful option.
Bridging loans offer short-term borrowing solutions that allow buyers to complete on a property before their main mortgage is finalised. These loans are particularly effective in situations where time constraints, such as tax deadlines or seller pressures, are a factor.
A bridging loan essentially provides the funds to buy a property upfront, allowing the transaction to be completed without waiting for a traditional mortgage.
Once the purchase has completed, you will then need to look to repay the bridging loan, which is why it is essential to have a clear exit strategy, such as an approved mortgage offer or the proceeds from a property sale.
While bridging finance offers speed and flexibility, it comes with significantly higher costs than a standard mortgage. Interest rates on bridging loans typically range between 0.5 per cent and 1.5 per cent per month, which means they can quickly become expensive if not repaid promptly.
There are also arrangement fees and potential valuation costs to consider. For those already close to exchanging contracts, it may be worth exploring as a last-minute solution, but it is not a decision to take lightly. Seeking advice from a specialist mortgage broker is crucial in understanding the costs, risks, and whether it is the right move for your circumstances.
For those who are just starting their home-buying journey, the stamp duty deadline is now out of reach. That does not mean, however, that buyers should rush or make hasty decisions.
Instead, it is important to speak with a mortgage broker who can help you understand your borrowing options and help you secure an Agreement in Principle. Choosing a proactive conveyancer who can manage the legal process efficiently can also help ensure a smoother transaction.
While the opportunity to complete before the stamp duty changes is now extremely limited, buyers can still position themselves for a smooth and efficient purchase.
Those already in the process may be able to push for faster completion, while others can take the time to plan carefully and explore their financing options.
Seeking professional mortgage advice remains the best way to navigate the home-buying journey, ensuring informed decisions and a well-structured financial plan for the future.
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