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first time buyer deposit

dd95
dd95 Posts: 213 Forumite
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in House buying, renting & selling
Hi all,

I know this is probably a silly question but it;s really confusing me.

So i have agreed a purchase price (first time buyer) of £170,000. I have around 20k to put towards the purchase.

Now ive seen that there are two deposits to pay (mortgage and exchange) so how do these work? I presumed i could put the 20k towards the purchase and thus my mortgage will be for 150k? so what is this about an exchange deposit?

Thanks!

Comments

  • JGB1955
    JGB1955 Posts: 3,479 Forumite
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    My understanding is that you would have to pay 10% on exchange... so that's your first £17,000 gone. The balance would be paid by your mortgage company and your remaining £3,000.
    #2 Saving for Christmas 2024 - £1 a day challenge. £131 of £366
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    The word "deposit" is used in two very different ways - and, yes, it can be confusing.

    First, the mortgage.
    You are buying for £170k. You are borrowing £150k. You are putting a "deposit" of £20k - this is your equity in the purchase.

    Second, the exchange of contracts.
    You are buying for £170k. When you exchange contracts, you pay 10%/£17k as a security "deposit". This is forfeit if you do not complete. You then pay the remaining 90%/£153k on completion.
  • dd95
    dd95 Posts: 213 Forumite
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    thanks,

    so i dont have to pay another deposit in addition to the 20k? Confusing!
  • dd95
    dd95 Posts: 213 Forumite
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    thanks, so i will need around 37k of my own money then? (20k equity in purchase and 17k for the 10% on exchange?
  • G_M
    G_M Posts: 51,977 Forumite
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    dd95 wrote: »
    thanks, so i will need around 37k of my own money then? (20k equity in purchase and 17k for the 10% on exchange?
    First, the mortgage.
    You are buying for £170k. You are borrowing £150k. You are putting a "deposit" of £20k - this is your equity in the purchase.

    Second, the exchange of contracts.
    You are buying for £170k. When you exchange contracts, you pay 10%/£17k as a security "deposit". This is forfeit if you do not complete. You then pay the remaining 90%/£153k on completion.
  • kingstreet
    kingstreet Posts: 38,763 Forumite
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    You are putting down a deposit of your choice.

    Some you will pay to your solicitor ahead of exchange of contracts the remainder you will pay to your solicitor ahead of completion.

    It's still the amount of deposit you have chosen, nothing more, nothing less.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    so i will need around 37k of my own money then? (20k equity in purchase and 17k for the 10% on exchange?

    No. The 17k at exchange comes from the 20k equity you will have in the purchase.

    17k "deposit" on exchange that you will lose if you do not complete.

    3k extra "deposit" on completion makes 20k total that is your equity in the purchase.
  • dd95
    dd95 Posts: 213 Forumite
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    that makes sense, thank you very much
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    No. You put your £20k equity in.


    £17k of it goes to the vendor's solicitor (and usually on up the chain) on exchange, the remaining £3k goes at completion along with the other £150k.
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