10% deposit - does it come up the chain?

R10

Hi

Hope someone can help with my question.

Am I correct in thinking that the 10% deposit that is payable on exchange comes up the chain, i.e. the deposit we get from our buyers would be a large chunk of our deposit on the house we are buying (plus we make up the extra from savings)?

We were FTB 15 years ago and haven't moved since so it is all a bit hazy. I am currently researching HIPs, tarting up/emptying the house and totting up the costs to make sure we can afford it. If we have to find the 10% as well it will be a no go

Many thanks

Sharon

Snippa

The "deposit" usually refers to the deposit given to your mortgage company. So if you're buying a house at £100,000 on mortgage, you need to have 10% - ie £10,000 up front, as the mortgage company will only lend you 90%. It's not a deposit given to the seller.

Is that what you mean?

If yo have a 10% deposit, you'll get a mortgage at a certain rate, and if you can find more, say 25% you'll get a better rate, as that's les risky for the mortgage company. A few years ago 100% mortgages were common, but virtually impossible to find now.

Snippa

So your "deposit" will basically come from whatever you make from the sale of the house, plus any savings you've got.

PasturesNew

If you are sitting in a house, with equity sufficient to cover at least the deposit, but you have no savings, then you don't actually part with a penny. The deposit is theoretical. If you exchange and then don't complete, you owe that money to the people you let down. So you don't actually have to have the money as such.

G_M

I think people are misunderstanding the question. This is due to the two different meanings of 'deposit'.

1) As Snippa says, it can mean the amount you personally contribute to the purchase price - the balance coming from the mortgage (not, as snippa says "given to your mortgage company" - you never give the mortgage company anything). This can be any amount from around 10% of the purchase price to 50% or more if you have a lot of savings. (In the bad old days of 100% mortgages, there would be a zero deposit).

2) The question here, however, refers to the amount paid to the vendor on Exchange of Contracts. This is usually 10% (or 5%) of the full purchase price. It comes from YOU, not the mortgage company, which will only hand out the mortgage money at Completion.

The answer to the question, then, is 'YES'. Your solicitor will arrange to Exchange contracts on both your sale and your purchase on the same day.

You will receive 10% (unless you agree to 5%) from your buyer, and will have to give 10% (or 5%) to your seller. Assuming you are buying a more expensive house you will have to make up the difference from your pocket.

If you are down-sizing, the 10% you pay will be smaller than the 10% you receive, so you can stash the difference in your bank account!

R10

G_M wrote: »

2) The question here, however, refers to the amount paid to the vendor on Exchange of Contracts. This is usually 10% (or 5%) of the full purchase price. It comes from YOU, not the mortgage company, which will only hand out the mortgage money at Completion.

The answer to the question, then, is 'YES'. Your solicitor will arrange to Exchange contracts on both your sale and your purchase on the same day.

You will receive 10% (unless you agree to 5%) from your buyer, and will have to give 10% (or 5%) to your seller. Assuming you are buying a more expensive house you will have to make up the difference from your pocket.

Thank you, yes, that is what I meant. We will be buying more expensive so will have a difference to make up, but probably not too much.

Sharon

pastmybest

G_M wrote: »

If you are down-sizing, the 10% you pay will be smaller than the 10% you receive, so you can stash the difference in your bank account!

Surely all deposit money is held by the solicitors, as stakeholders, and so not quite true you that you will get it and be able to stash in your bank account.

Jonbvn

pastmybest wrote: »

Surely all deposit money is held by the solicitors, as stakeholders, and so not quite true you that you will get it and be able to stash in your bank account.

In our case, the vendor received the 10% deposit on exchange, and the remaining money on completion.

pastmybest

Jonbvn wrote: »

In our case, the vendor received the 10% deposit on exchange, and the remaining money on completion.

Yes but I make the point that until legal completion takes place the money is held by the solicitors and can't be touched/used by the seller.

G_M

pastmybest is, of course, right. I was being loose in my explanation though the basic principal of how deposits are 'passed up the chain' works was correct.

Sorry for any confusion.

Jonbvn

pastmybest wrote: »

Yes but I make the point that until legal completion takes place the money is held by the solicitors and can't be touched/used by the seller.

Not true in our case. However it was for a new build house a few years back.