Why does vendor care about my deposit?

looknohands

I've put an offer on a property and the rival offer is £1k lower than mine, the Estate Agent is telling me the other offer is 5% more deposit, I have 10%. Why does this make them a better prospect?

mrginge

Because they have a better chance of getting a mortgage.

looknohands

But how do they know I don't earn more than the other offer or that I have a better credit score? Speculating a bit but they might have that deposit from a gift, i've saved my deposit myself.
Seemed like a strange thing to bring up, would understand if it was 50% of the value or 100% but 6% seems like an idle threat. Can't you just lie about the deposit, it's not legally binding that you get the mortgage you're saying you will get!

libf

Could be a lot of reasons...

1. It's easier to get a 90% mortgage than a 95% mortgage.
2. If the valuation downgrades then there's room to move from a 90% mortgage to a 95% mortgage.
3. They might need a larger deposit to pass up the chain
4. They might think having a larger deposit shows you're more serious about purchasing

mrginge

You're right, they don't.
Deposit size is just an indicator and you could quite happily tell them any old number.
Just like the EA can make up a rival offer and tell you some rubbish to help persuade you to increase your offer.

Pixie5740

An 85% LTV mortgage is easier to get than a 90% LTV mortgage. Less risk to the lender and lower monthly repayments. The source of the deposit doesn't matter as long as it complies with money laundering regulations.

How do you know that the person with the £1k lower offer doesn't earn more than you, have better credit history and hasn't managed to save the 15% deposit themselves?

looknohands

Pixie5740 wrote: »

An 85% LTV mortgage is easier to get than a 90% LTV mortgage. Less risk to the lender and lower monthly repayments. The source of the deposit doesn't matter as long as it complies with money laundering regulations.

How do you know that the person with the £1k lower offer doesn't earn more than you, have better credit history and hasn't managed to save the 15% deposit themselves?

Just an assumption that I can't look that bad.. my AIP that EA seen says I can get a mortgage of £235,000, the mortgage I need for this property is £155,000 so it's considerably less. Clearly an AIP is not worth anything...

libf

looknohands wrote: »

Just an assumption that I can't look that bad.. my AIP that EA seen says I can get a mortgage of £235,000, the mortgage I need for this property is £155,000 so it's considerably less. Clearly an AIP is not worth anything...

If you've shown the EA you can afford more then look forward to them trying to drive your offer up, as they're generally paid a % of the sale price.

mrginge

looknohands wrote: »

Just an assumption that I can't look that bad.. my AIP that EA seen says I can get a mortgage of £235,000, the mortgage I need for this property is £155,000 so it's considerably less. Clearly an AIP is not worth anything...

See post 5.

They have sucked you in nicely.
They know exactly how much extra they can get out of you.

beefturnmail

You pay a deposit on exchanging contracts and the balance on completion (via your mortgage company if through a mortgage).

All other things being equal, a higher deposit will therefore always be better from the vendors point of view - if you were selling which would you accept £20k cash up front and £200k a week later, or £25k cash up front and £195k a week later?

Obviously most vendors would probably prefer £20k up front and £205k a week later, over £25k up front and £195k a week later, but maybe not £20k up front and £201k a week later, so the EA is probably seeing if you can up your offer.

mrginge

beefturnmail wrote: »

You pay a deposit on exchanging contracts and the balance on completion (via your mortgage company if through a mortgage).

All other things being equal, a higher deposit will therefore always be better from the vendors point of view - if you were selling which would you accept £20k cash up front and £200k a week later, or £25k cash up front and £195k a week later?

Obviously most vendors would probably prefer £20k up front and £205k a week later, over £25k up front and £195k a week later, but maybe not £20k up front and £201k a week later, so the EA is probably seeing if you can up your offer.

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