New Stamp Duty boost for first-time buyers

Buying a property doesn't come cheap and, while you focus on saving up enough money to pay for the deposit, it's easy to forget about additional costs such as Stamp Duty. But, from today (Tuesday April 30) mortgage lender Halifax will reimburse first-time buyers for the 1% Stamp Duty which applies to property purchases between £125,000 and £250,000.

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This means that if you were to buy a house for £150,000, Halifax will pay £1,500 towards your Stamp Duty bill, up to a maximum of £2,500 for those purchasing a £250,000 home.

First-time buyers purchasing a home for less than £125,000 (and therefore free from Stamp Duty) will receive £250 cash back from Halifax, while those buying a home worth more than £250,000 won't receive any cash back at all.

The offer, which runs until July 7, is available exclusively to first-time buyers across Halifax's mortgage range. This includes its two-year fixed rate mortgage priced at 3.24% (for those with a deposit of between 20% and 25%) and its two-year fixed rate mortgage priced at 3.79% (for those with a deposit of between 15% and 20%).

Neither of these mortgage deals comes with an arrangement fee.

Should I take Halifax up on this offer?

But while first-time buyers are usually happy for any help they can get, before you decide whether to snap up the offer, it's worth bearing a few things in mind. 

Firstly, as mentioned above, the deal is only available to those with a deposit of at least 15%. For many first time buyers, this is still unaffordable, but the good news is there are now a number of mortgages on the market for those who can only slot aside a much smaller deposit.  

 

For example, if you have a 10% deposit, HSBC offers a two-year fixed rate mortgage priced at 3.64%, reverting to 3.94% after two years. The overall cost for comparison is 4% APR and early repayment charges apply. But be aware the deal does come with a fee of £999.

Those with a deposit of just 5% don't have to be excluded from the mortgage market either as there are a number of schemes targeted at these borrowers. In this year's Budget, for example, Chancellor George Osborne announced the launch of its new Help to Buy scheme which gives first-timers with a 5% deposit access to more competitive rates – as the government stumps up a further 20%. You can find out more about the scheme, which is only available on new-build homes, in Mark Hooson's article.

Meanwhile, Lloyds TSB's Lend a Hand mortgage scheme is also open to borrowers with a deposit of 5%, although you'll need to find a friend or family member who is happy to put up savings of up to 20% of the property value as additional security for the mortgage. You can read about this scheme and similar ones in Robert Adungo’s article here.

Do your sums

But even if you can stump up the 15% deposit required with Halifax's offer, the lender's mortgages aren't necessarily the cheapest on the market.

The Post Office, for example, offers a two-year fixed rate fee-free mortgage at 3.49%, beating the 3.79% offered by Halifax.

If, for example, you bought a house worth £190,000, and put down a deposit of 15%, you would borrow £161,500. Borrowing this with Halifax at a rate of 3.79% would mean you would pay £20,016 over the two-year period, on a repayment basis (over 25 years).

By comparison, if you borrowed the same amount with the Post Office at a rate of 3.49%, you'd pay £19,392 over the two years, making it the cheaper option.

BUT, because you'll pay 1% in Stamp Duty with the Post Office mortgage, you'll fork out an additional £1,900 (1% of £190,000), taking your total costs to £21,292. Therefore, the Post Office mortgage is actually the more expensive option overall. But either way, it pays to do your sums first.

If you're at all confused about which deal is right for you, you can contact our mortgage partner, London & Country, for free, independent advice on 0844 209 8725. You can see what mortgage deals are available over on our mortgages channel here.

Finally, bear in mind that if you buy a property worth more than £250,000, you won't qualify for Halifax's offer, and Stamp Duty is payable at a rate of 3% on properties priced between £250,001 and £500,000, 4% on properties worth £500,000 to £1million, 5% on properties priced between £1million and £2million, and 7% on those worth more than £2million.

YOUR HOME MAY BE REPOSSESSED IF YOU DON'T KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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