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    • Lizmorton90
    • By Lizmorton90 13th Jul 17, 4:58 PM
    • 19Posts
    • 0Thanks
    Mortgage deposit
    • #1
    • 13th Jul 17, 4:58 PM
    Mortgage deposit 13th Jul 17 at 4:58 PM

    I need to understand how deposits work. I currently live in a flat valued at 100k which I plan on putting on the market soon. I originally bought it for 90k (81k mortgage and 9k deposit). I want to buy a bigger house up to a max of 250k. When i come to sell I will owe roughly 77k to nationwide. So I understand if it sold at 100k nationwide would take 77k leaving me with 23k there abouts. If I aim for a 10% deposit on a house worth 250k how does the deposit work? Will I need 25k in the bank at exchange? Or will my buyers money go through the chain and if so how does the shortfall work because my buyers 10% would only be 10k leaving a 15k shortfall. I have savings too to account for all the fees and have enough to cover the additional 2k needed for the deposit if my flat sold at 100k leaving 23k to me.

    Clarity would be great, thanks in advance.
Page 1
    • glosoli
    • By glosoli 13th Jul 17, 6:23 PM
    • 673 Posts
    • 391 Thanks
    • #2
    • 13th Jul 17, 6:23 PM
    • #2
    • 13th Jul 17, 6:23 PM
    The deposit requirement for the new property would be 25,000. Assuming your flat sells for 23,000, then you would require a further 2,000 to meet the full deposit. You would then need funds on top of this for other costs, such as stamp duty, legal fees, mortgage fees, and other general moving costs.

    At exchange, generally people require a 10% deposit to put down, however in this case all of your funds are tied up in equity, therefore you would need to tell this to your solicitor. Your solicitor can mention this to the vendors solicitor and come up with an agreement on the way forward, i.e your asset may provide the required assurance or they may request simultaneous exchange and completion, it varies case by case.
    • Lilla D
    • By Lilla D 13th Jul 17, 10:01 PM
    • 327 Posts
    • 167 Thanks
    Lilla D
    • #3
    • 13th Jul 17, 10:01 PM
    • #3
    • 13th Jul 17, 10:01 PM
    The full deposit amount (ie. 25k in your example) will have to proven when you apply for the new mortgage. Your equity can be proven by a memorandum of sales confirming the sale price of 100k and your mortgage statement confirming the mortgage balance of 77k. Then you'll have to show the remaining 2k in your bank account.

    10% deposit on exchange of contracts is just a market standard amount, it does not have to be 10%, if both the seller and the buyer agree on a different amount. For example, if you get 10k from your buyer and you put down another 2.5k to make the total 12,500 = 5%, the seller may accept it. Exchange of contracts makes the purchase legally binding, so the seller will have the reassurance that you'll come up with the rest of the goods on completion.

    It is also possible to do simultaneous exchange and completion, as mentioned above, which basically means that your sale and your purchase exchange and complete on the same day. In other words, your buyer pays you (well, your solicitor) 100k, your new lender sends 225k to your solicitor and you'll send the remaining 2k from your account to your solicitor. The solicitor will then repay your current 77k mortgage and sends the rest of the funds to the seller. (I'm ignoring here the other costs and just focusing on your question)
    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.
    • Lizmorton90
    • By Lizmorton90 14th Jul 17, 4:44 PM
    • 19 Posts
    • 0 Thanks
    • #4
    • 14th Jul 17, 4:44 PM
    • #4
    • 14th Jul 17, 4:44 PM
    Thanks both that makes much more sense now.
    • Darkstar
    • By Darkstar 14th Jul 17, 6:53 PM
    • 356 Posts
    • 31 Thanks
    • #5
    • 14th Jul 17, 6:53 PM
    • #5
    • 14th Jul 17, 6:53 PM
    Have you considered all the cost involved in selling and buying. Stamp duty, estate agent fees solicitors fees etc.
    Dark in here, is't it...
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