house buyer offering less than 5% deposit

frogglet

Madmel said:

When we sold late MiL's flat some years ago, on the verge of exchange, the buyer claimed not to know that she needed to pay a deposit.  Far from being a FTB, this was an elderly lady going into a retirement property.  Her own sale fell through months earlier, so she part-exchanged her house.  She asked if she could exchange, move in and then complete, to which we just fell about laughing and said no.  Then our solicitor rang and said there was another issue in that she "didn't realise" she would have to pay money over at exchange.  The solicitor was brilliant; she recommended simultaneous exchange & completion as we were the end of the chain.  We did wonder about re-marketing but were so fed up that we just wanted the money and took the path of least resistance.  In the end, it did go through on the same day.

30 years ago we bought a property with an employer who guaranteed our 100% mortgage. We recently moved and the deposit was a surprise to us.

AskAsk

frogglet said:

Madmel said:

When we sold late MiL's flat some years ago, on the verge of exchange, the buyer claimed not to know that she needed to pay a deposit.  Far from being a FTB, this was an elderly lady going into a retirement property.  Her own sale fell through months earlier, so she part-exchanged her house.  She asked if she could exchange, move in and then complete, to which we just fell about laughing and said no.  Then our solicitor rang and said there was another issue in that she "didn't realise" she would have to pay money over at exchange.  The solicitor was brilliant; she recommended simultaneous exchange & completion as we were the end of the chain.  We did wonder about re-marketing but were so fed up that we just wanted the money and took the path of least resistance.  In the end, it did go through on the same day.

30 years ago we bought a property with an employer who guaranteed our 100% mortgage. We recently moved and the deposit was a surprise to us.

it was weird in the olden days wasn't it?  i think you could buy a house without a deposit, or get a mortgage that was more than 100% so you could spend the extra mortgage on a holiday or to do the house up?  crazy.

Blue_bell_20

If you exchange quite some time before completing, and most of their money is in a help to buy ISA, then removing any of the money to pay the initial exchange wouldn’t get the bonus. However if you exchange and complete on the same day I think this would solve that issue. Maybe it’s an ISA/bonus issue. 

md258

Blue_bell_20 said:

If you exchange quite some time before completing, and most of their money is in a help to buy ISA, then removing any of the money to pay the initial exchange wouldn’t get the bonus. However if you exchange and complete on the same day I think this would solve that issue. Maybe it’s an ISA/bonus issue. 

That was my first thought when I started reading and was surprised no-one mentioned it earlier. With 2x HTB ISAs (or LISAs) they could have £30k (or more if they'd both transferred their HTB to a LISA) that they can't get at before completion, which would bring their (completion) deposit to just over 10%, but their exchange deposit is far lower.

jackomdj

How are you finding your 10% deposit, I assume using theirs for part but the balance you refer to ‘with equity’ you won’t have any equity available until completion.

Crashy_Time

AskAsk said:

frogglet said:

Madmel said:

When we sold late MiL's flat some years ago, on the verge of exchange, the buyer claimed not to know that she needed to pay a deposit.  Far from being a FTB, this was an elderly lady going into a retirement property.  Her own sale fell through months earlier, so she part-exchanged her house.  She asked if she could exchange, move in and then complete, to which we just fell about laughing and said no.  Then our solicitor rang and said there was another issue in that she "didn't realise" she would have to pay money over at exchange.  The solicitor was brilliant; she recommended simultaneous exchange & completion as we were the end of the chain.  We did wonder about re-marketing but were so fed up that we just wanted the money and took the path of least resistance.  In the end, it did go through on the same day.

30 years ago we bought a property with an employer who guaranteed our 100% mortgage. We recently moved and the deposit was a surprise to us.

it was weird in the olden days wasn't it?  i think you could buy a house without a deposit, or get a mortgage that was more than 100% so you could spend the extra mortgage on a holiday or to do the house up?  crazy.

Nothing crazy about it, it was a deliberate policy to get lots of secured lending into the economy, didn`t end well and the bubble it created is still with us.

Slinky

Madmel said:

When we sold late MiL's flat some years ago, on the verge of exchange, the buyer claimed not to know that she needed to pay a deposit.  Far from being a FTB, this was an elderly lady going into a retirement property.  Her own sale fell through months earlier, so she part-exchanged her house.  She asked if she could exchange, move in and then complete, to which we just fell about laughing and said no.  Then our solicitor rang and said there was another issue in that she "didn't realise" she would have to pay money over at exchange.  The solicitor was brilliant; she recommended simultaneous exchange & completion as we were the end of the chain.  We did wonder about re-marketing but were so fed up that we just wanted the money and took the path of least resistance.  In the end, it did go through on the same day.

If she was an elderly lady, she may have been of the generation where she had never dealt with anything financial, if her husband dealt with it all.

Crashy_Time

Thrugelmir 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.

Being FTB's probably assuming (incorrectly) that obtaining an AIP guarantees them a mortgage. 

Yes probably.

EasyLay

First of all many thanks for all the responses.

Our buyer has instructed us that they can't bring their deposit from 3.75% up to 5% as "he did not advise the estate agent that he would be able to provide a 5% deposit at the beginning of the process", which to me does not seem to be a satisfactory reason but there we are. So we're going to ask our sellers if they will accept a 5% deposit from us, and also ask if we can have a relatively quick exchange to completion time of a week. The other alternative is to exchange/complete on the same day. I've read a lot of conflicting stories about this online with regard to the risk involved and how often it can go wrong. Does anyone know what the pros/cons of this might be?

Thanks in advance

p00hsticks

EasyLay said:

The other alternative is to exchange/complete on the same day. I've read a lot of conflicting stories about this online with regard to the risk involved and how often it can go wrong. Does anyone know what the pros/cons of this might be?

Thanks in advance

The main con is in trying to arrange removals, when you're not 100% sure that exchange is going to happen until the actual day that you legally need to be completely out of the property.

The main pros I can think of are that a) it means you don't need to find cash up front for the deposit on exchange, and b) you don't run the risk of having legally committed to the purchase (on exchange) and then your circumstances changing in a way that would have you struggling to complete (e.g having to self-isolate, getting made redundant )