House Purchase - Top up Deposit
Discussion
Hello all, i am looking to pick the brains of the PH collective.
Situation Summary: We have sold our place, and are buying a new home. Assuming that we put some £ towards solicitors fee's, the equity from the sale of our place, plus the increased mortgage, covers the costs of the new property + stamp duty + estate agents fees.
The question i have comes down to this, our solicitor has written to us to ask for a bank transfer to "top-up" our deposit on our purchase. I have changed the figures, but they are representative.
Deposit from sale of current property = 10% of £250,000 = £25,0000
Deposit required for purchase = 10% of 370,000 = £37,000
Top up required by bank transfer before exchange of contracts = £12,000
This was completely unanticipated, i had assumed that because the costs were covered form the sale of our place + mortgage, we wouldn't have to find any "extra" money. We don't just have £12k lying around! Whilst we could probably find it (as we would only be fronting ourselves the money for a few weeks) its will be a royal PITA, and end up costing us money in charges etc / borrowing off relatives etc.
Is this normal (friends who have sold/bought say they did not do this)? Is there anyway around it? Obvisouly we would ask out solicitor but there is no-one in the office today!
Situation Summary: We have sold our place, and are buying a new home. Assuming that we put some £ towards solicitors fee's, the equity from the sale of our place, plus the increased mortgage, covers the costs of the new property + stamp duty + estate agents fees.
The question i have comes down to this, our solicitor has written to us to ask for a bank transfer to "top-up" our deposit on our purchase. I have changed the figures, but they are representative.
Deposit from sale of current property = 10% of £250,000 = £25,0000
Deposit required for purchase = 10% of 370,000 = £37,000
Top up required by bank transfer before exchange of contracts = £12,000
This was completely unanticipated, i had assumed that because the costs were covered form the sale of our place + mortgage, we wouldn't have to find any "extra" money. We don't just have £12k lying around! Whilst we could probably find it (as we would only be fronting ourselves the money for a few weeks) its will be a royal PITA, and end up costing us money in charges etc / borrowing off relatives etc.
Is this normal (friends who have sold/bought say they did not do this)? Is there anyway around it? Obvisouly we would ask out solicitor but there is no-one in the office today!
Some contracts state you need to transfer 10% of the purchase price when you exchange contracts. which would make sense as the solicitor would need that in there account on exchange.
Check here - http://hoa.org.uk/advice/guides-for-homeowners/i-a...
You could sell yours move out and then you'd have the capital to do it. would take a little longer but would work
Check here - http://hoa.org.uk/advice/guides-for-homeowners/i-a...
You could sell yours move out and then you'd have the capital to do it. would take a little longer but would work
Edited by Dan_M5 on Thursday 1st June 15:28
It's normal, yes. It's not unusual for the buyer up the chain to accept the amount of the deposit, or perhaps 5% rather than 10%, on exchange of contracts. Ask your solicitor about that when they're in tomorrow. There's no guarantee it'll be accepted, particularly if the seller is buying somewhere more expensive as well.
I think it's often one of those things you can negotiate with your seller and their solicitor, see if they're willing to take £25k instead, IANAL but I think you could exchange by giving the seller £1 if both parties agreed to it, obviously there wouldn't be much comfort there for the seller if you decided to pull out, as they'd only keep £1, but £25k is a bit different.
In my experience, solicitors will normally set contracts to exchange with a deposit equal to the deposit that you receive for the property that you are selling. Sounds like yours just went with a default 10%. Nothing wrong with this but they should have pointed out to you earlier in the process that you'd need to find the short-fall
Steve Evil said:
but I think you could exchange by giving the seller £1 if both parties agreed to it, obviously there wouldn't be much comfort there for the seller if you decided to pull out, as they'd only keep £1, but £25k is a bit different.
You can't decide to pull out once you've exchanged; that would be breach of contract. As soon as you breach the contract you have to stump up the balance to make the deposit up to 10% immediately.
Jobbo said:
Steve Evil said:
but I think you could exchange by giving the seller £1 if both parties agreed to it, obviously there wouldn't be much comfort there for the seller if you decided to pull out, as they'd only keep £1, but £25k is a bit different.
You can't decide to pull out once you've exchanged; that would be breach of contract. As soon as you breach the contract you have to stump up the balance to make the deposit up to 10% immediately.Steve Evil said:
As said, not a lawyer, but good to know.
No problem - I wasn't criticising (you could indeed exchange with a £1 deposit if the seller accepted that), just providing a bit more info. Topping up to 10% as soon as you fail to complete on the contractual date is not something I've often seen explained, but entirely standard.Jobbo said:
It's normal, yes. It's not unusual for the buyer up the chain to accept the amount of the deposit, or perhaps 5% rather than 10%, on exchange of contracts. Ask your solicitor about that when they're in tomorrow. There's no guarantee it'll be accepted, particularly if the seller is buying somewhere more expensive as well.
This is probably your answer, the people above will probably accept a lower deposit in order to keep things moving. It's a fairly common issue. That said, you must have known you needed a 10% deposit on exchange......I'd be working on the back up plan of finding the 12K* just in case they say no.
Bob
* or whatever the actual number is
Jobbo said:
AyBee said:
You've managed to get a mortgage based on c.6.8% equity in the new place?
The deposit on exchange is not the same as the amount of equity in the property (which is also, unhelpfully, referred to as your deposit by the mortgagee).
Okay thanks all, seems like we may be able to negotiate a lower deposit. As suggested i will only know when i speak to our solicitor tomorrow.
fat80b said:
That said, you must have known you needed a 10% deposit on exchange......I'd be working on the back up plan of finding the 12K* just in case they say no.
Actually no, i didn't know that! This is out first time selling / buying (we are moving out of our first home) and i had assumed that our deposit on the new property could/would come from the equity in the one we are selling, and no-one told me otherwise! Unfortunately exchanging on different days, as a poster above suggested, isn't possible as we are porting our mortgage. As said in my OP, we will be able to find the money, it will just be a rather large ball ache! That will be plan b if the solicitors aren't playing ball with using the lower deposit jimmy156 said:
Actually no, i didn't know that! This is out first time selling / buying (we are moving out of our first home) and i had assumed that our deposit on the new property could/would come from the equity in the one we are selling, and no-one told me otherwise! Unfortunately exchanging on different days, as a poster above suggested, isn't possible as we are porting our mortgage. As said in my OP, we will be able to find the money, it will just be a rather large ball ache! That will be plan b if the solicitors aren't playing ball with using the lower deposit
Are the people buying your place putting down a deposit? It's sometimes possible for deposits to travel 'up the chain', i.e. their cash can top up your deposit.I had this concern when moving last year.
Sold at £265k and bought at £460k, so would have been quite a chunk of cash (which I didn't have).
As said above, the solicitors agreed that I could do a £26.5k deposit on exchange instead of £46k.
It's not unusual so the solicitors should be fine with it. And if the seller refuses they're an idiot as they don't actually see the money until completion anyway.
Sold at £265k and bought at £460k, so would have been quite a chunk of cash (which I didn't have).
As said above, the solicitors agreed that I could do a £26.5k deposit on exchange instead of £46k.
It's not unusual so the solicitors should be fine with it. And if the seller refuses they're an idiot as they don't actually see the money until completion anyway.
I'm a little bit confused about this situation - we are I believe in a similar situation as in we are using the equity from our sale as the deposit to buy our new home.
My situation outline below - I assumed that this would all just happen on the day of completion in order from bottom of chain to top, is this incorrect?
We have sold our flat @145k with 82k outstanding mortgage. We have a cash buyer.
We have bought a house @ 385k and will be mortgaging 345k so 40k deposit. The rest of the equity will be used to pay stamp duty, agents fees etc and then for furniture etc
I assumed our buyer would pay us, well solicitor and mortgage company. Then the 40k plus mortgage would be released to the person we are buying off.
Is this incorrect? Is this different from the situation described in the OP?
My situation outline below - I assumed that this would all just happen on the day of completion in order from bottom of chain to top, is this incorrect?
We have sold our flat @145k with 82k outstanding mortgage. We have a cash buyer.
We have bought a house @ 385k and will be mortgaging 345k so 40k deposit. The rest of the equity will be used to pay stamp duty, agents fees etc and then for furniture etc
I assumed our buyer would pay us, well solicitor and mortgage company. Then the 40k plus mortgage would be released to the person we are buying off.
Is this incorrect? Is this different from the situation described in the OP?
I have now read the link in this thread and recognise the difference between exchange and completion.
The advantage we have is a cash buyer I guess - could negotiate to get a deposit from them equivalent to our required deposit if needed.
The alternative is to exchange and complete on the same day which was I guess the original plan I had in my head. Will need to discuss with our solicitor
The advantage we have is a cash buyer I guess - could negotiate to get a deposit from them equivalent to our required deposit if needed.
The alternative is to exchange and complete on the same day which was I guess the original plan I had in my head. Will need to discuss with our solicitor
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