Will the bank pay deposit on exchange of contracts?

cashorcheque

Hi,

I just got my firm mortgage offer sent through today for a house my OH and I are buying. We are currently in a very little bit of negative equity and this is a negative equity mortgage with our current lender. Please don't flame me for this - we bought at more than market value in 2007 when we were 25 and wanted to get on the property ladder, and we are now borrowing less than 2.5 times our income. We are simply porting our existing negative equity (it's £5k on £200k owed) to a new property which has space for our growing family - we have a one year old daughter - and which will significantly reduce both our commutes.

As it is a negative equity mortgage, however, we have no deposit. On exchange of contracts we'll have to pay a £19500 deposit (10% of the value of the new house). Obviously we don't have this (or we wouldn't be in negative equity), so my question is: will the bank pay this?

Thanks in advance.

Thrugelmir

cashorcheque wrote: »

On exchange of contracts we'll have to pay a £19500 deposit (10% of the value of the new house). Obviously we don't have this (or we wouldn't be in negative equity), so my question is: will the bank pay this?

No they won't.

Irrespective of whether you are in negative equity or not. The deposit needs to be paid by yourselves on exchange.

The bank will only advance the funds on completion.

Have you consulted your conveyancing solicitor regarding this?

Soot2006

Is it a 100% mortgage?

.. Has anyone asked you at any point where the deposit money is coming from?

cashorcheque

Yes it's a 100% mortgage. Actually it's 102.5%. Nobody has asked us where any funds are coming from except for the moving costs, which we have saved.

We did a 100% mortgage before and didn't have to find the deposit.

StuC75

As you are selling a property its common practice for the deposit from your buyer to form the deposit that you pass on (Potential up the chain).. deposit for mortgage \ ltv calculations is different to deposit on exchange..

We recently moved and were using the equity from the sale to cover ours (in mortgage calculation terms) and never had to pay anything extra to the solicitors - they just used the deposit received from our sale exchanging.

cashorcheque

Oh, that makes sense - and phew! We're taking the contracts in to the solicitor today so I'll check, but hopefully that's the case.

Thank you!

pinkteapot

But.... How much deposit is your buyer paying? If it's 10% of your sale price, is it as much as £19,500?

If not, you need to make your solicitor aware so that they can find out if the person you are selling to is happy to accept a smaller deposit.

Errata

Solicitors do a three card trick with deposits, buyer's deposit becomes sellers deposit to deposit on the property they're buying. And so on all along the chain.

cashorcheque

Great - thank you for clarifying.

Yes, we are selling our house for £194950 and buying for £19500 (so we have to chuck £50 in). So their deposit will be £5 short of 10% of the value of our new home. I reckon we can rummage up £5 if necessary!

Thanks again.

girl_withno_name

cashorcheque wrote: »

Great - thank you for clarifying.

Yes, we are selling our house for £194950 and buying for £19500 (so we have to chuck £50 in). So their deposit will be £5 short of 10% of the value of our new home. I reckon we can rummage up £5 if necessary!

Thanks again.

I think you missed a zero there... or maybe this is your new pad?

cashorcheque

Ha ha! Wow, £19950 for a flat. That must be some location.