Deposit question

byeo

I'm not sure how to properly explain this but I'll try my best.

Do you have to have the full deposit amount ready when putting in an offer or can you be "short" on the basis you'll have the full amount by the time the deposit is transferred?

Does the vendors estate agent care about this or is it more to do with my mortgage lender who'll want assurances I can get the right amount in time..?

Wanderingpomm

Your conveyancer will want proof of the deposit amount and you usually have had to have had it in your bank for 3 months for money laundering reasons or you need to prove where you got it.

NewShadow

byeo wrote: »

I'm not sure how to properly explain this but I'll try my best.

Do you have to have the full deposit amount ready when putting in an offer or can you be "short" on the basis you'll have the full amount by the time the deposit is transferred?

Does the vendors estate agent care about this or is it more to do with my mortgage lender who'll want assurances I can get the right amount in time..?

When making an offer on a property the seller doesn't know what your limit is and I'd recommend not discussing what you can afford or the size of your deposit... it's not really any of their business and will hurt you in negotiations if they think they can push you higher.

All I ever said to the seller/any of the EAs on the topic was that I was a first time buyer, with broker who had secured an approval in principle for the required mortgage, and had a solicitor selected who could begin work as soon as a price was agreed.

As far as I understand it, your solicitor will want proof of funds/source of funds - and your money needs to be transferred to the solicitor before exchange can take place - which is likely 6-12 weeks after your offer is accepted. You can keep adding money to the pot until the last minute - but you need to satisfy your solicitor where it's coming from - so either gift letters, up-to-date bank statements, notes from the sale of investments...

I don't even think the mortgage company even care that much - they'll make you an offer on specific terms and if you're short/something changes at the last minute they'll either pull or change what they're offering.

I mean, until you actually agree a price/apply for the mortgage/have the house valued - you don't actually know how much you'll be putting down as deposit vs what the bank will loan you against the property...

AdrianC

byeo wrote: »

I'm not sure how to properly explain this but I'll try my best.

Do you have to have the full deposit amount ready when putting in an offer or can you be "short" on the basis you'll have the full amount by the time the deposit is transferred?

Does the vendors estate agent care about this or is it more to do with my mortgage lender who'll want assurances I can get the right amount in time..?

First off, don't get confused by the two meanings of "deposit".

First is the usually 10% that you'll need to transfer at exchange. If you don't complete, you lose that. Some of that may be borrowed from the lender, if you've got a 90%+ LtV mortgage. You need to make sure that's with your solicitor in time for exchange.

Second is your actual equity in the purchase - the money you aren't borrowing. Anything above the 10% deposit will need to be with your solicitor in time for completion.

byeo

NewShadow wrote: »

As far as I understand it, your solicitor will want proof of funds/source of funds - and your money needs to be transferred to the solicitor before exchange can take place - which is likely 6-12 weeks after your offer is accepted. You can keep adding money to the pot until the last minute - but you need to satisfy your solicitor where it's coming from - so either gift letters, up-to-date bank statements, notes from the sale of investments...

AdrianC wrote: »

First is the usually 10% that you'll need to transfer at exchange. If you don't complete, you lose that. Some of that may be borrowed from the lender, if you've got a 90%+ LtV mortgage. You need to make sure that's with your solicitor in time for exchange.

Second is your actual equity in the purchase - the money you aren't borrowing. Anything above the 10% deposit will need to be with your solicitor in time for completion.

Thank you both for this information, I think I understand how it works now.

At exchange I'll give my solicitor 10% of my deposit eg, 10% of a £20,000 deposit would be £2000 at exchange?

The remaining £18,000 would be transferred in time for completion? (plus any additional savings I've got since exchange took place).

Is completion basically the last step before getting the keys?

Sorry for all the questions.

davidmcn

byeo wrote: »

At exchange I'll give my solicitor 10% of my deposit eg, 10% of a £20,000 deposit would be £2000 at exchange?

No, 10% (usually) of the price.

The remaining £18,000 would be transferred in time for completion? (plus any additional savings I've got since exchange took place).

You transfer the remainder for completion.

Is completion basically the last step before getting the keys?

Yes.

byeo

davidmcn wrote: »

No, 10% (usually) of the price.


You transfer the remainder for completion.


Yes.

Ah ok, 10% of the price of the property not my deposit.

eddddy

byeo wrote: »

Thank you both for this information, I think I understand how it works now.

At exchange I'll give my solicitor 10% of my deposit eg, 10% of a £20,000 deposit would be £2000 at exchange?

The remaining £18,000 would be transferred in time for completion? (plus any additional savings I've got since exchange took place).

Is completion basically the last step before getting the keys?

Sorry for all the questions.

I'm not sure if you do understand.

Let's try with some numbers:

• You want to buy a house for £200k
• You're getting a mortgage for £180k (i.e. a 90% mortgage)
• You've got £20k of savings (i.e. a 10% deposit)

If you offer £200k on a house, and the offer is accepted, the estate agent will probably immediately ask to see:

• A mortgage 'agreement in principle' for £180k
• A bank statement showing £20k savings

The estate agent wants to check that you are not a time-waster, with no mortgage and/or no savings.

If the bank statement only shows £15k - but you say you'll save up the remaining £5k before exchange of contracts - that might worry the estate agent.

The estate agent would tell the person selling the house, and they might decide to reject your offer, and look for another buyer who has all their savings already in place.


Moving forward to exchange of contracts...

• Your solicitor will want you to give him/her your £20k savings before exchanging contracts

• Your solicitor will check you past bank statements to make sure that you got this £20k legally

• Your solicitor will get the remaining £180k from your mortgage company, just before completion.

• Your solicitor will pay the full £200k to the seller on the day of completion

• Then, on the day of completion, you will get the keys to the property.

byeo

eddddy wrote: »

I'm not sure if you do understand.

Let's try with some numbers:

• You want to buy a house for £200k
• You're getting a mortgage for £180k (i.e. a 90% mortgage)
• You've got £20k of savings (i.e. a 10% deposit)

If you offer £200k on a house, and the offer is accepted, the estate agent will probably immediately ask to see:

• A mortgage 'agreement in principle' for £180k
• A bank statement showing £20k savings

The estate agent wants to check that you are not a time-waster, with no mortgage and/or no savings.

If the bank statement only shows £15k - but you say you'll save up the remaining £5k before exchange of contracts - that might worry the estate agent.

The estate agent would tell the person selling the house, and they might decide to reject your offer, and look for another buyer who has all their savings already in place.


Moving forward to exchange of contracts...

• Your solicitor will want you to give him/her your £20k savings before exchanging contracts

• Your solicitor will check you past bank statements to make sure that you got this £20k legally

• Your solicitor will get the remaining £180k from your mortgage company, just before completion.

• Your solicitor will pay the full £200k to the seller on the day of completion

• Then, on the day of completion, you will get the keys to the property.

Thanks, seems like conflicting advice makes the waters muddy again. I guess I can stick an offer in and if they aren't happy with what I provide, the worse they can do is then reject it, I lose no money and know where I stand.

Thanks again for putting another perspective on it.

AdrianC

byeo wrote: »

Thank you both for this information, I think I understand how it works now.

At exchange I'll give my solicitor 10% of my deposit eg, 10% of a £20,000 deposit would be £2000 at exchange?

The remaining £18,000 would be transferred in time for completion? (plus any additional savings I've got since exchange took place).

No...

Let's say it's a £250k purchase, and you need a £200k mortgage.

Your equity "deposit" is £50k - the part of the price you're putting forward.
Your exchange security "deposit" is £25k - 10%.

So £25k for exchange, the rest of the £50k for completion together with the lender's £200k

The "deposit" is two completely different concepts which may well be two completely different amounts.

Is completion basically the last step before getting the keys?

Yes.

Exchange of contracts is when you are legally bound to the purchase.
Completion of the purchase is when you actually buy the place.

eddddy

byeo wrote: »

Thanks, seems like conflicting advice makes the waters muddy again.

Which bit is conflicting and muddy?

If you point it out, I'll try to give you more details.


Edit to add...

If you want to mention some real figures - property price, mortgage value, savings - we can use those.