Selling house then buying new house at the same time as regards deposit

NI_Sense

Hi.
Still unclear about this. Like a lot people I am about to sell my house and hopefully buy another at the same time. So entering a chain basically. On that, the question is- can I only use the deposit from the person buying my house to further buy my new home, or is it the future equity I would use from my house sale to buy a new home? For example, if say someone buys my house for 100k, and after taking off legal fees, estate agents fees and redeeming my existing mortgage, I have 40k equity left. However, since I won't get that equity until my house completes, can I still count that as my deposit towards a new home before I actually receive it or is it the 10% deposit from my house sale only? Ultimately, a 10% deposit for the sale of my house would not allow me to cover the deposit on my new home so any advice is appreciated.

Salemicus

On exchange, the deposit gets passed up the chain. You do not normally have to top that up to 10%.

Continuing your example, say your buyers are first-time buyers. They give your solicitor 10k as a deposit. You are buying a house for 150k. Your solicitor passes the 10k on to your vendors' solicitors, as your deposit on the house you are buying. Even though this is less than 10% (i.e. 15k) that is typically OK as a holding deposit on exchange.

You then put in the rest of the equity on completion.

greatcrested

as above, though that is dependant on the sellers above you agreeing to a deposit less than 10%.

They may and often o.

Or they may not. In which case you'll have to top it up.

NI_Sense

greatcrested said:

as above, though that is dependant on the sellers above you agreeing to a deposit less than 10%.

They may and often o.

Or they may not. In which case you'll have to top it up.

Thanks, much appreciated. If I do have to top up, is that where a bridging loan might come in? 

GDB2222

I guess any loan will do. Whatever is cheapest. Bank loan is probably cheaper than a bridge. Maybe credit card?

Mutton_Geoff

I've never had to top up the deposit when upsizing, it's all done on a promise between the solicitors. You will be liable to cough up the full deposit if something goes wrong after exchange of contracts though. And that's before all the legal issues of breach of contract etc.

When I downsized, my solicitor received 10% on my sale and paid for my purchase but there was some £50,000 surplus now sitting in his client account. I was not allowed to access those funds during the 8 weeks between exchange and completion even though it was "my" money. It didn't worry me since I was buying my new place using that cash to lower by borrowing.

Mickey666

I don’t think there’s any legal requirements for a 10% deposit in the first place, it’s just a convention.  

I’ve never paid a 10% deposit and have always negotiated a lower figure based on what I could afford at the time without having to take out a short-term loan, which always seemed ridiculous to me.
Solicitors will usually ask for 10% but they can’t force it and if you can agree a lower figure with the seller then they have no choice but to accept their client’s instruction to accept a lower deposit.

mrschaucer

Mickey666 said:

I don’t think there’s any legal requirements for a 10% deposit in the first place, it’s just a convention.  

I’ve never paid a 10% deposit and have always negotiated a lower figure based on what I could afford at the time without having to take out a short-term loan, which always seemed ridiculous to me.
Solicitors will usually ask for 10% but they can’t force it and if you can agree a lower figure with the seller then they have no choice but to accept their client’s instruction to accept a lower deposit.

The 10% deposit requirement is stated in the Standard Conditions of Sale (which forms the legal contract) which virtually all solicitors use.  It is not a requirement, however, and can be varied, but only with the agreement of all parties.

Mickey666

Yes, it’s just a convention.  However, ‘all parties’ does not include the solicitors themselves, they are only acting for the seller and buyer so it is only those two parties who need to agree an acceptable deposit and then instruct their solicitors accordingly.

I’ve never had a problem negotiating a lower than 10% deposit,  but then I’ve always dealt directly with the buyer/seller personally rather than go through the EA or solicitors.  In my experience, when personal contact is made there is less chance of people ‘behaving badly’ compared to when they hide behind the EA or their solicitor.  

NI_Sense

Many thanks for your replies. I will very likely end up with a deposit a bit less than 10% at exchange of contracts stage. My plan is add to that deposit when I get my full equity through at completion. I would imagine I would need a tracker mortgage with no ERC for the new house to do that? Or can I get my solicitor to take the deposit top-up off at completion?

Irishpearce26

NI_Sense said:

Many thanks for your replies. I will very likely end up with a deposit a bit less than 10% at exchange of contracts stage. My plan is add to that deposit when I get my full equity through at completion. I would imagine I would need a tracker mortgage with no ERC for the new house to do that? Or can I get my solicitor to take the deposit top-up off at completion?

You cant add to your deposit after completion as the sale is complete. Whoever your seller is will likely accept a lower than 10% deposit at exchange as they will do the same if they have a chain above them. It has to be agreed by your solicitors otherwise you will have to make up the different at exchange or the sale doesn't happen.