house buyer offering less than 5% deposit

pinkteapot

AskAsk said:

they would not be able to get a mortgage if they don't have 10% deposit.

That’s what I thought. It doesn’t make sense. Unless family are gifting cash for the purchase and won’t hand it over till just before completion for some reason? 

I’d ask the EA to have a chat with the buyer to understand why they don’t have 10% but can still get a mortgage.

It’s also possible the buyer is coming into some money, or has it tied up in fixed term savings, and it’ll be available after exchange and before completion (depending on dates involved).

AskAsk

pinkteapot said:

AskAsk said:

they would not be able to get a mortgage if they don't have 10% deposit.

That’s what I thought. It doesn’t make sense. Unless family are gifting cash for the purchase and won’t hand it over till just before completion for some reason? 

I’d ask the EA to have a chat with the buyer to understand why they don’t have 10% but can still get a mortgage.

even with a 10% deposit, people may still struggle to get a mortgage, so with even less than 5%, the bank will just laugh at them.  you can only buy properties with low deposit if it is a new build as far as i am aware.

ussdave

It's pretty common for the mortgage deposit to be coming from the sale of an existing property.  In such a case the buyers would not have that cash to hand to pay a holding deposit at exchange.  

[Deleted User]

ussdave said:

It's pretty common for the mortgage deposit to be coming from the sale of an existing property.  In such a case the buyers would not have that cash to hand to pay a holding deposit at exchange.  

its first time buyers that are being discussed.    gifted deposit not being ready is the most likely suggestion that has come up

EasyLay

AskAsk said:

pinkteapot said:

AskAsk said:

they would not be able to get a mortgage if they don't have 10% deposit.

That’s what I thought. It doesn’t make sense. Unless family are gifting cash for the purchase and won’t hand it over till just before completion for some reason? 

I’d ask the EA to have a chat with the buyer to understand why they don’t have 10% but can still get a mortgage.

even with a 10% deposit, people may still struggle to get a mortgage, so with even less than 5%, the bank will just laugh at them.  you can only buy properties with low deposit if it is a new build as far as i am aware.

The house isn't a new build. We were told the buyer's had arranged their mortgage weeks ago. It seems that with the mortgage lender wanting to value our house, and this reduced deposit, maybe the mortgage isn't quite as finalised as we were led to believe.

AskAsk

EasyLay said:

AskAsk said:

pinkteapot said:

AskAsk said:

they would not be able to get a mortgage if they don't have 10% deposit.

That’s what I thought. It doesn’t make sense. Unless family are gifting cash for the purchase and won’t hand it over till just before completion for some reason? 

I’d ask the EA to have a chat with the buyer to understand why they don’t have 10% but can still get a mortgage.

even with a 10% deposit, people may still struggle to get a mortgage, so with even less than 5%, the bank will just laugh at them.  you can only buy properties with low deposit if it is a new build as far as i am aware.

The house isn't a new build. We were told the buyer's had arranged their mortgage weeks ago. It seems that with the mortgage lender wanting to value our house, and this reduced deposit, maybe the mortgage isn't quite as finalised as we were led to believe.

i don't believe any bank will lend to a first time buyer with a deposit of 3.75%.  they may have misunderstood what the mortgage offer is.

ussdave

Deleted_User said:

ussdave said:

It's pretty common for the mortgage deposit to be coming from the sale of an existing property.  In such a case the buyers would not have that cash to hand to pay a holding deposit at exchange.  

its first time buyers that are being discussed.    gifted deposit not being ready is the most likely suggestion that has come up

Ah, I missed that somehow.  Fair enough.

kinger101

pinkteapot said:

kinger101 said:

What deposit did they say they'd make when they offered?  I'd want them to stick to this.  

Bought and sold many houses and deposit size has never once been discussed at point of offering...

It's been a discussion point in all four transactions I've been involved in.  EAs routinely ask buyers how much deposit they have and then to provide evidence before vendor accepts STC.  I've also been asked to state how much deposit I'd have on houses I've offered on unsuccessfully or later withdrawn from (another six).

It's standard industry practice to ensure the buyer is credible, and assess the merits of their offer against any other.  There's a possibility this hasn't been done here, leaving OP with a flaky buyer.

hazyjo

AskAsk said:

EasyLay said:

AskAsk said:

pinkteapot said:

AskAsk said:

they would not be able to get a mortgage if they don't have 10% deposit.

That’s what I thought. It doesn’t make sense. Unless family are gifting cash for the purchase and won’t hand it over till just before completion for some reason? 

I’d ask the EA to have a chat with the buyer to understand why they don’t have 10% but can still get a mortgage.

even with a 10% deposit, people may still struggle to get a mortgage, so with even less than 5%, the bank will just laugh at them.  you can only buy properties with low deposit if it is a new build as far as i am aware.

The house isn't a new build. We were told the buyer's had arranged their mortgage weeks ago. It seems that with the mortgage lender wanting to value our house, and this reduced deposit, maybe the mortgage isn't quite as finalised as we were led to believe.

i don't believe any bank will lend to a first time buyer with a deposit of 3.75%.  they may have misunderstood what the mortgage offer is.

I think you're getting confused about the term "deposit" .

It's not the deposit to get a mortgage (currently usually a min of 15%). It's the deposit paid up the chain to exchange.

eddddy

kinger101 said:

pinkteapot said:

kinger101 said:

What deposit did they say they'd make when they offered?  I'd want them to stick to this.  

Bought and sold many houses and deposit size has never once been discussed at point of offering...

It's been a discussion point in all four transactions I've been involved in.  EAs routinely ask buyers how much deposit they have and then to provide evidence before vendor accepts STC.  I've also been asked to state how much deposit I'd have on houses I've offered on unsuccessfully or later withdrawn from (another six).

It's standard industry practice to ensure the buyer is credible, and assess the merits of their offer against any other.  There's a possibility this hasn't been done here, leaving OP with a flaky buyer.

It sounds like you're confusing 2 different types of deposit... An example might help...


Say you're buying a £200k house - with a £150k mortgage.

• Deposit type 1) The EA will ask you how much 'deposit' you have. The answer is £50k (or 25%)

• Deposit type 2) On exchange of contracts, you normally pay a 10% 'deposit' - so that's £20k. This is what the OP is asking about.

In the above example, you would typically pay £20k on exchange - than pay another £30k plus £150k from the mortgage on completion.

The OP is talking about "Deposit Type 2" - and wondering why the buyer is offering 3.75% instead of the typical 10%.