Why put down a large deposit?

j_mchattie

I'm not moving house but my brother is and he has heard horror stories of lenders pulling out after exchange and buyers losing their deposits. I told him this must be a rare thing and his application isn't borderline or dodgey in anyway so he will be fine.

But it got me thinking. Lets say a first time buyer puts in a £20,000 deposit and their lender pulls out. Deposit gone.

Now, if someone else puts down a deposit of £200,000 and only needs a small mortgage but the lender pulls out (not sure why they would) - do they lose £200,000?

I've not researched this so I don't really know how it works but wouldn't it make more sense for the person with £200,000 to put down a £20,000 deposit and then just pay a £180,000 lump sum off their (large) mortgage?

I'm confused about what the deposit is actually for and how much you can potentially lose!

Thanks :beer:

mrginge

Deposits paid to a solicitor on exchange and that used for the mortgage are not necessarily the same thing.

hcb42

You do need to research it, you are right..!

princeofpounds

As stated, they are different things. The deposit on exchange is a smaller, standard sum (10pc IIRC). The deposit for a mortgage is this sum and any cash over and above this, and that goes over on completion.

Non-completion is exceptionally rare as long as you are careful with your timescales and do not give false information to the lender. It's most at risk with new builds bought before construction has finished, but even then backstop dates can help protect you.