When I exchange do I pay some money?

suziemoon

I am in the process of buying a house and selling another one but the two transactions are not connected. When I exchange contracts on the one I am buying do I need to pay anything?

lmwarr21

Yes any deposits for the house and solicitors fees.

suziemoon

When you say any deposits what does that mean? Sorry to be thick but I'm buying from a private individual not a new build so there is no deposit as such. My Husband thinks that when you exchange you pay 10% of the purchase price to the Solicitor to hold until completion. Is this correct?

Gwhiz

suziemoon wrote: »

When you say any deposits what does that mean? Sorry to be thick but I'm buying from a private individual not a new build so there is no deposit as such. My Husband thinks that when you exchange you pay 10% of the purchase price to the Solicitor to hold until completion. Is this correct?

That is correct (although it can be less than 10% is both parties agree).

Normally where you are selling as well, your 10% is actually made up of the 10% your buyers are putting down plus any extra from you if required to make up the 10% on your purchase.

You need to have cleared funds for exchange to happen so best speak to your solicitor.

G_M

You pay (normally) 10% of the purchase price at Exchange as a deposit, and the remaining 90% at Completion.

This is entirely independant of any mortgage you may or may not be getting. The 'deposit' which together with the mortgage makes up the purchase price is totally unrelated to the 10% 'deposit' paid at Exchange.

It's a stupid, and confusing, double meaning of the term.

Richard_Webster

You pay (normally) 10% of the purchase price at Exchange as a deposit, and the remaining 90% at Completion.

This is entirely independant of any mortgage you may or may not be getting. The 'deposit' which together with the mortgage makes up the purchase price is totally unrelated to the 10% 'deposit' paid at Exchange.

Yes, solicitors wish that nobody used the word "deposit" in relation to mortgages at all. A deposit is the amount you put down the secure the deal - which is what happens at exchange - 10% or a negotiated lesser amount.

AFK_Matrix

Ok I am confused with this then and it maybe cos its the end of the day lol.

So here is an example to see if I am getting this:

I am selling my house for 100k and buying a house for 200k and I have a deposit for the mortgage of 30k so a ltv of 85% and a deposit of 15%.

Now the person buying my house has a 10% deposit for the mortgage. So when exchange happens my buyer would give the solicitor the 10% amount of the money he has to the solicitor correct? Then my solicitor needs 10% of the house cost I am buying so 20k. Now he already has 10k from my buyer so I now need to add 10k to this? And would this 10k come out of the 15% 'deposit' I have for the mortgage?

Or do I have to give the solicitor 20k and this is coming from the 15%/30k deposit I have?

Sorry for all the questions but my next house will mean selling my first house so would be nice to get it straight in my head!

suziemoon

Oh now you've confused me AFK!! I just thought I needed to pay 10% of the value of the house we were buying and that as that amount is lower than my amount I am putting into purchasing the house I would pay the balance to the Solicitor a few days before completion and he would then get the mortgage money, tie it all together and send it on to the Seller. Is this not correct?

princeofpounds

suzie, I think people are getting confused by what you mean when you say 'the two transactions are not connected'.

If you are in a chain, then your solicitor can use the money your buyer pays to them on exchange (10% typically) towards the money you pay towards your vendor on exchange (also 10%, but typically a bigger sum if you are trading up).

If the two transactions are not in a chain, then you will have to fund the whole 10% on exchange yourself.

Your husband is correct in that you will have to pay some money on exchange. The remainder of the equity you are putting into the house you pay before completion, and your solicitor draws down the mortgage arounsd the same time.

The two amounts serve different purposes. The deposit paid on exchange is really insurance for the other side of the contract that you will complete as agreed. The remainder of the 'deposit' - probably better termed equity - that you pay before completion provides the agreed safety buffer for your mortgage lender.

If all goes through as planned, the total amount represents your equity ownership of the property.

So, in numbers....

House purchase agreed for 100k. You have 30k cash to put towards it. This is commonly called a deposit, but is really equity.

Exchange contracts. Pay 10k to your solicitor, who lodges it with the vendor's solicitor. This is a 'real' deposit.

Just before completion, pay the remaining 20k to your solicitor. Your solicitor draws 70k from the mortgage company. This totals 90k, which is paid to the vendor, and you complete.

martindow

Sometimes everyone in the chain agrees to pass the 10% paid by the person at the bottom of the chain to use as deposits all the way up. No one in the middle of the chain has to add any extra. This has to be agreed by everyone as the percentage of the most expensive house in the chain will be much smaller than 10%.