10% on exchange normal ?

Willow101

Hi,

So we're in the process of buying and our solicitor informs us we need to give them 10% on exchange. Is this normal ? It's not that we're trying to avoid it, it's just that all our money is tied up in current house which we're remortgaging on the same day as completing on new purchase, so the funds won't be available until the remortgage goes through (we have all the paperwork to show we have a mortgage in place). We have about 5% available to give us a deposit on exchange.

Any experience or thoughts?

Thanks.

booksurr

have you read a book on how the house selling and buying process works ?

perhaps try a search? this question and the answer remains the same. The deposit moves up the chain on exchange. At some point in the chain the money getting passed upwards from the purchaser will need topping up by using the vendor's own cash to reach the 10% value of the deposit required of them for the place they themselves buy (assuming everyone is trading up of course)

10% is the normal START point. You can always try to negotiate

https://forums.moneysavingexpert.com/discussion/5474758

https://forums.moneysavingexpert.com/discussion/5474757

https://forums.moneysavingexpert.com/discussion/5464146

and pay attention to what could happen if a chain breaks....
https://forums.moneysavingexpert.com/discussion/5469998

McTaggus

We had the same surprise - it seems to be a pretty common confusion, particularly for anyone buying a 95% LTV property without prior home buying experience (i.e. confusing the deposit you put down for your mortgage with the deposit required on exchange, which is 10% as standard).

We negotiated with our sellers, and arranged for a 5% deposit to be put down by ourselves. They tried to negotiate up the chain, to see if everyone would accept a 5% deposit, but the next step up the chain wouldn't accept lower than 10%. As a result, they agreed to top up the remaining 5% that we couldn't pay so the total payment up the chain came to the 10% the next step were expecting.

10% is the norm, so would suggest that you need to contact your sellers and see if they would be willing to proceed with a lower deposit value at exchange. We had a clause added to the contracts stating that although we were only putting down 5% on exchange, we would maintain liability for the full 10% in the event that we pulled out after exchange.

It will all depend on what your sellers are happy and, equally, able to commit to - if they're wholly dependent on your 10% deposit going up the chain and can't cover a shortfall, it could present a fairly substantial issue for the chain as a whole.

dc197

McTaggus's final sentence is also true even if there is no chain beyond your sellers. They may simply want to see the full 10% even if they have no-one to pass it upwards to.

You don't necessarily have to give them the full cash. They may be happy that your solicitor holds your cash on your behalf, ready to pass it on should you default.

You don't necessarily have to lodge the entire 10% purchase deposit either. You may only have to lodge enough to ensure the full 10% is there once you sell your house. That is, you only need to lodge the top up amount of (onward purchase price x 0.1) subtract (your sale price x 0.1).
(Of course this only applies if you are upsizing.)

I was told by a friend that I would not need to have my 10% deposit ready at exchange, but the sellers demanded it. I forwarded the difference to my solicitor who told the sellers it was held, and the sellers were happy.
By chance, this top-up amount was more-or-less the stamp duty I needed to pay anyway, so I didn't have to part with more than I expected anyway.

Willow101

Thank you for your replies.

There's no chain on either side and the seller isn't using the money for deposit on next one so hopefully we can come to an arrangement where just over 5% is enough.

I was just surprised and wondered what people in a similar situation to us do - i.e. we have the money and we're keen but all our money is tied up in our existing property so until we remortgage or sell the funds wont be released - just thought we can't be too unusual but maybe we are? Hopefully this is the final time we move but atleast we'll know for next time if not.

agrinnall

I don't really see how it can be a surprise to you, you must have faced the need to pay a deposit when buying the house you are in now. Why would you think it would be any different when moving house? If it really worries you then do what I've always (not necessarily by design) done and sell first then you'll have the equity from the first house available as cash when you buy the next one.

Willow101

We exchanged and completed on the same day on a quick sale with our first and didn't cross our mind this time.

its not a problem as such as we can bridge the gap with a loan, we just hadn't realised and so thought I'd post to see if anyone gone through similar predicament.

VultureDodger

Sorry to hijack this thread, but can I ask a really stupid question... Does this also apply to people purchasing a new build using the HTB scheme, or is that the whole point of the scheme?

AdrianC

VultureDodger wrote: »

Sorry to hijack this thread, but can I ask a really stupid question... Does this also apply to people purchasing a new build using the HTB scheme, or is that the whole point of the scheme?

A new-build may very well be a different kettle of fish entirely - the HTB won't set the deposit required, that'll be the developer you're buying from.

There'll also likely be various other advance-commitment payments, everything from an initial holding deposit to advance payments for any options.

But, for a normal non-new-build, 10% on exchange is definitely the norm, and long has been.

Money_saving_maniac

agrinnall wrote: »

I don't really see how it can be a surprise to you, you must have faced the need to pay a deposit when buying the house you are in now. Why would you think it would be any different when moving house? If it really worries you then do what I've always (not necessarily by design) done and sell first then you'll have the equity from the first house available as cash when you buy the next one.

This is a surprise to me too. I've only bought once before and I was a FTB, I handed over my cash but just thought of it as 'part of the purchase' because the bank were lending 92%. This time all my cash is tied up in the house, which will be the large deposit for the next loan 60% loan.

I don't really see why it shouldn't come as a surprise to someone who has not been a part of a chain before.

Samsonite1

It is strange because 10% is the standard deposit for exchange, yet even I found it a surprise when buying for the 3rd time. Not sure why it was not a thing previously, but it was certainly a thing this time around! We had put a load of money aside for doing up the house then we were asked for £79k and we were slightly taken aback. It confuses you because you budget based on what you receive from the sale, yet you have to stump up large amounts ahead of time. There must be a better way!