When to pay deposit when buying a house

danielanthony

Say I'm selling my house and buying another, when do you put down the deposit on the house you are buying. E.g. If you were buying a £100k house at 60% LTV, when do you stump up the 40%?

A colleague of mine said you need to put down at least 10% in cash as a deposit to keep the chain together even if all your money is tied up in the property. But the money your buyers are putting as deposit on your property can be counted towards the deposit on the property you are buying.

This didn't sound right to me...

G_M

Confusingly there are two meanings of 'deposit'.

At Exchange of Contracts, a buyer needs to pay 10% (deposit) of the purchase price (though this can be negotiated with the seller, often to 5%). The buyer needs to find this from savings as the mortgage will not be released till Completion.

At Completion, the remaining 90% of the purchase price must be paid. This will come from:
1) the mortgage and
2) the buyers savings (also referred to as the 'deposit).

kingstreet

Where there is sufficient equity from the sale to fund the deposit, I have never known a solicitor ask a subsequent purchaser for a cash deposit.

If it's a part equity/part cash situation that would obviously be different.

Solicitors tend to "kick" the cash deposit from the beginning of the chain, up the chain, as long as everyone is happy with that.

danielanthony

G_M wrote: »

Confusingly there are two meanings of 'deposit'.

At Exchange of Contracts, a buyer needs to pay 10% of the purchase price (though this can be negotiated with the seller, often to 5%). The buyer needs to find this from savings as the mortgage will not be released till Completion.

At Completion, the remaining 90% of the purchase price must be paid. This will come from:
1) the mortgage and
2) the buyers savings (also referred to as the 'deposit).

So is this where Bridging Loans come into it? The house we're looking at is actually £400k and with stamp duty at 3% + 10% deposit at Exchange of Contracts means we need £52k to get the ball rolling; even if we will get the 10% (£40k) back when we complete that's a lot of money to find down the back of the sofa! FYI we have £80k equity in our current house if that makes any difference.

G_M

danielanthony wrote: »

So is this where Bridging Loans come into it? The house we're looking at is actually £400k and with stamp duty at 3% + 10% deposit at Exchange of Contracts means we need £52k to get the ball rolling; even if we will get the 10% (£40k) back when we complete that's a lot of money to find down the back of the sofa! FYI we have £80k equity in our current house if that makes any difference.

At Exchange you need to pay £40K (10% of £400K).

Stamp Duty is not paid till (after) Completion.

If you are selling, you will also receive a deposit of 10% which can be used to fund the 10% you pay. Often the buyers/sellers negotiate to agree that the % deposit you pay = the deposit you receive.

Are you doing the conveyancing yourself? If so. I advise you not to since you do not seem to understand what is involved.

If you are using a solicitor/conveyancer, they should arrange all this and advise you - have you asked them?

danielanthony

G_M wrote: »

At Exchange you need to pay £40K (10% of £400K).

Stamp Duty is not paid till (after) Completion.

If you are selling, you will also receive a deposit of 10% which can be used to fund the 10% you pay. Often the buyers/sellers negotiate to agree that the % deposit you pay = the deposit you receive.

Ah, I understand now! Many thanks