Deposits

Sncjw

Hi guys and gals

rigjt so we are ready to exchange the contracts and I’ve been reading about closing my help to buy isa account.  The help to buy site mentions two deposits the exchange and the mortgage deposit. 

Now I’m panicking that I have missed something. We have 10% saved up and was going to use that in exchange. But do we need more money now? 

anselld

They are talking about the situation where people may have more that 10% deposit towards the purchase, ie a LTV below 90%.  In that case 10% would be paid on exchange and the remainder on completion.

If you are FTB with 10% deposit saved (plus fees and other move in costs) and 90% LTV mortgage then you will be fine.  Remember you don't get the HTB ISA bonus until completion so you can't rely on that bit for deposit.

Before you do anything check with your solicitor that your are genuinely ready to exchange and complete to the top of the chain because there have been some delay issues due to the cv crisis.  Indeed the gov advice is to delay unless it is essential to proceed.

Comms69

The deposit can ofcourse be any amount, even 0, when exchanging. that is something that can be negotiated. 

AdrianC

Sncjw said:

rigjt so we are ready to exchange the contracts and I’ve been reading about closing my help to buy isa account.  The help to buy site mentions two deposits the exchange and the mortgage deposit. 

Now I’m panicking that I have missed something. We have 10% saved up and was going to use that in exchange. But do we need more money now? 

It's simply that the word "deposit" is used in two contexts.

10% is normally handed over at exchange, as a security deposit against you failing to complete. The other 90% is paid at completion.

Then there's the "deposit" you've saved up, your equity in the purchase. In your case, that's also 10%, which just happens to confuse you further. Perhaps a better way of looking at that is that you need to borrow 90% of the purchase price, in the form of a mortgage.

Your solicitor pays over 10% of the purchase price at exchange. That's the 10% you've saved up. Then, on completion, they draw down the 90% you're borrowing and pay that over.

eddddy

Sncjw said:

Now I’m panicking that I have missed something. We have 10% saved up and was going to use that in exchange. But do we need more money now? 

No - you probably don't need any more savings, apart from legal fees, SDLT etc. It depends what percentage mortgage you are getting.

• Assuming you're getting a 90% mortgage, you just pay 10% deposit at exchange. Then the mortgage covers the rest of the cost.

• But say you were getting a 75% mortgage, you still pay a 10% deposit at exchange, your solicitor hands over another 15% on completion (so you need to give that 15% to your solicitor in advance). And the mortgage covers the rest.

LoveSauce

Not going to lie, a year ago, when i started house hunting, this confused me too!

Sncjw

Thanks guys it’s just a things that has confused me as money saving expert website says the mortgage despot 

greatcrested

A mortgage despot is something completely different.....