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33% deposit - very high?
jez9999
Posts: 77 Forumite
I don't know whether I'm missing something here, but apparently I'm having to pay a deposit of about £100k on my new build house, which is about a third of the price. My uncle, who's an accountant, says that's extremely high, and a normal deposit is 10% (even if my mortgage is only 2/3 of the house price, I shouldn't need to pay more than 10% in advance of completion).
Is this just the way new house builders do things or am I misunderstanding something?
UPDATE: It turns out that "deposit" was simply the mortgage brokers' way of referring to the amount left to be paid on the house after the mortgage. I'm expected to negotiate with the builders for something like a 5% to 10% "exchange deposit". So it all comes down to different meanings of "deposit".
Is this just the way new house builders do things or am I misunderstanding something?
UPDATE: It turns out that "deposit" was simply the mortgage brokers' way of referring to the amount left to be paid on the house after the mortgage. I'm expected to negotiate with the builders for something like a 5% to 10% "exchange deposit". So it all comes down to different meanings of "deposit".
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You need a higher income or higher valuation0
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They're giving the deposit as the house price minus the mortgage, so maybe it's their terminology to mean "balance of monies"? Why is the mortgage lender even concerned about the deposit amount?Very few developers (if any) require a deposit that large. It is normally in the region of 5-10% on exchange of contracts. Are you sure this is not being driven by the mortgage lender instead? Often lenders require at least a 15-20% deposit on a new build, sometimes more for flats. Even then, 33% - aside from being an oddly precise number - is very high for a minimum requirement.0 -
This use of the term 'deposit' here is the difference between what you are paying for the property and what you are borrowing from your bank/BS.
It is not the same as the 'deposit' the seller /developer requires to receive at Exchange of Contracts - usually 5 or 10%.
So you need to discuss/confirm how much you are expected to pay at Exchange.
I'm surprised your uncle does not understand this.........0 -
I thought it might be something like that. How very confusing to overload the term "deposit".This use of the term 'deposit' is the difference between what you are paying for the property and what you are borrowing from your bank/BS.
It is not the same as the 'deposit' the seller /developer requires to receive at Exchange of Contracts - usually 5 or 10%.
So you need to discuss/confirm how much you are expected to pay at Exchange.0 -
I think we might be talking at crossed purposes. I'm using the term "deposit" to refer to the amount paid at the time of exchange, not the amount of the house paid for by the person buying it.Ummm, because it’s representative of their risk. The higher your deposit, the less risk of them being unable to recover the full amount owed in the event they have to repossess + sell the house.
Because new builds often lose value the second the keys are handed over, deposit requirements are often higher than existing properties.0 -
Did you go with a mortgage advisor through the developer? That's the only reason I can think of that the development would be telling you anything of this sort...
Say the house is 300k , and the developers mortgage advisor has run the numbers on you and reported back that it looks like your max borrowing is 200k, even though their 'basic' deposit is 5/10%, in your case it would be 33% because you are 100k short of the house price.
However I could be way off, but that's the only explanation I can think of.0 -
I'm still not really understanding why my being at max borrowing would affect the exchange deposit. If exchange is, say, 10 days before completion, it's the difference between me paying that 10 days before completion, and 1 day before completion - 9 days' difference. Why does this matter to them?ScottishSaver14 wrote: »Did you go with a mortgage advisor through the developer? That's the only reason I can think of that the development would be telling you anything of this sort...
Say the house is 300k , and the developers mortgage advisor has run the numbers on you and reported back that it looks like your max borrowing is 200k, even though their 'basic' deposit is 5/10%, in your case it would be 33% because you are 100k short of the house price.
However I could be way off, but that's the only explanation I can think of.0 -
the 'exchange deposit' is not affected by the 'mortgage deposit'.
Yes it's a recurring confusion amongst house-buyers. You need to separate the two in your mind. They are unconnected.0 -
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