Survey findings suggest almost half of recent purchasers are increasing their mortgage to cover stamp duty and fees
A growing number of Australian borrowers are increasing their loan size to cover stamp duty and other upfront costs, a move that can almost double the effective cost of those charges over the life of the mortgage, new research from Money.com.au suggests.
The survey found 46% of recent buyers increased their mortgage to pay for government charges such as duty, along with related purchase fees. Within this group, 28% boosted their loan sufficiently to fund all upfront costs.
In Tasmania, the impact is particularly stark. On a median-priced Hobart property of $704,000, stamp duty of $27,322 can rise to $55,786 in total outlay once interest over the loan term is taken into account if it is capitalised into a standard 30-year mortgage, according to the analysis. In regional Tasmania, an initial duty bill of $20,905 can climb to $42,684 under the same conditions.
Money.com.au mortgage expert Debbie Hays (pictured right) stressed that while adding duty and fees to the loan can be a practical way for some buyers to enter the market, it significantly increases their long-term interest costs.
“Many of those young buyers then roll those taxes and fees into their mortgage and take on a bigger debt than they originally planned,” she said.
“The real sting in the tail is you’ll pay interest on that extra amount over a 30-year term, because stamp duty and fees become part of your loan balance.”
Hays noted that for some households, financing these upfront expenses is the only realistic path to home ownership. However, she said borrowers should have a clear strategy to limit the interest paid on those capitalised costs, for example by directing surplus cash into an offset or making extra repayments via redraw.
“When the property grows in value, the equity can put them in a better position to refinance or restructure their loan down the track to pay less interest,” she said.
The research indicates that younger purchasers are the most likely to roll upfront costs into their mortgage. Almost two-thirds (64%) of Gen Z buyers reported borrowing extra to meet duty and purchasing fees, followed by 54% of Millennial buyers.
Hays said the approach is, however, often viewed by investors as a deliberate gearing strategy rather than a last resort. “For investors, rolling stamp duty and upfront costs into the loan is a strategic play,” she pointed out. “In most cases, the extra interest on the loan is tax-deductible.”
In Tasmania, first-home buyers purchasing established properties can access a full stamp duty exemption where the dutiable value is $750,000 or less. Hays said these thresholds have lagged behind price growth, leaving more young buyers outside eligibility and pushing some to finance duty and other charges through their mortgage instead. “This means many younger buyers miss out on duty relief and end up adding stamp duty and other fees into their loan,” she said.
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