Confused regarding Exchange of Contracts Deposit

Ash_92

Hey Guys

I have had a search about the forum but could not find my answer. Could someone please help me in regards to a query about Exchange of Contracts and the "10% deposit"?

My partner and I have just been offered a Shared Ownership house which is priced at £108,000 for a 40% share.

We have been to a mortgage lender and got a MIP for £102,600 (which is the property price minus our 5% deposit for the mortgage itself).

We have just had our offer letter through which states "If contracts are exchanged before the deadline, a deposit of 10% of the purchase price is to be paid on exchange of contracts, and the balance of the purchase price to be paid on completion".

Could someone please clear this up for me as I am in a whole world of confusion.

Will I have to fund this 10% deposit from my own pocket on Exchange of Contracts, Ie £10,800 or will this come from the Mortgage Lender out of the £102,600 we have in an MIP, then the rest (£91,800) from the mortgage lender upon completion?

Cheers for any help in advance!

Ash

Alter_ego

You will be expected to find the deposit. Try asking if they will accept 5% if that's all you have available.

Ash_92

So how does the mortgage lender side of it work? So if we are paying 10% (£10,800), we only need £91,800 from the mortgage lender themselves as opposed to £102,600? So will need to alter the mortgage application to reflect this, is that correct?

jackomdj

10% can be something else, and quite often is especially if your money is tied up in a property you are selling or in your case from a schemes funds. But if you do not complete for some reason you would become liable for the full 10%

Hoploz

You wouldn't need to alter th mortgage application - they will provide th agreed amount and part of it will come back to you. Unless you change your mind and decide you don't need to borrow so much