Deposit payment when buying a house

[Mandat]

Sorry if this is a silly question.

If I am buying a house, for say £500k, and I have £400k equity in the house I am selling, I will be getting a mortgage for the remaining £100k balance (ignoring STLD, fees, etc for simplicity).

Will I still need to have cash on hand to pay a deposit (say £50k based on 10%) on exchange of contracts? I think that the answer is yes, but wanted to check in case I was missing something.

The numbers all stack up for mortgage purposes (i.e. 20% LTV) but it becomes an issue of cash flow if I need to have an extra £50k in cash at exchange.

[TheDrownedApe]

No, your equity is your deposit etc

[Zetec-S]

My simple understanding - the cash will come from lower down the chain. When we moved we sold our house to a cash buyer, and their deposit was effectively passed up the chain. There was a minor hiccup when the top of the chain involved £1m+ houses and the deposit on our pokey little 3 bed wasn't enough, but the solicitors worked their magic somehow, I assume with some sort of cash injection further up.

Just speak to your solicitor and they should be able to clarify.

[Little Lofty]

The only time I have paid a deposit on exchange was on a new build or a auction property.

[alscar]

Usually the deposit is 10% on exchange but can be negotiated down to 5% perhaps.
Until the house completes therefore no equity per se is actually available.
However if in a chain then the deposit can often be moved upwards as such so you would need to find less money at that point.
Obviously if you are simultaneously exchanging and completing then not an issue.

[ARH]

All the times I have moved I never had to find a deposit, it just happened. Except my first house.

[silentbrown]

TheDrownedApe said:

No, your equity is your deposit etc

I think you're confusing mortgage 'deposit' vs the purchase deposit due to vendor on exchange.

You wouldn't want to exchange on your purchase until your buyer has exchanged with you - so you'd then have their 10% (£40K) to go towards the £50K you need to put down. You either find the remaining £10K down the back of the sofa, or negotiate a lower deposit with the vendor.

[Mandat]

Thanks for the replies so far.

It's been over 10 years since I bought the current house, and I remember (vaguely) that a 10% payment is due on exchange of contracts, hence asking the question.

[FlyVintage]

In the situation that the OP describes, there will be no requirement for a deposit .

In all the houses I have ever purchased, the only one that a deposit was even mentioned was my first . I bought that with 100% mortgage from Northern Rock (I know!) and I just said I didn t have one; hence the 100% mortgage. Nothing more was mentioned.

Deposits are not a condition of purchase! (at least not one you have to agree to)

Edited by FlyVintage on Tuesday 16th September 18:09

[alscar]

FlyVintage said:

In the situation that the OP describes, there will be no requirement for a deposit .

In all the houses I have ever purchased, the only one that a deposit was even mentioned was my first . I bought that with 100% mortgage from Northern Rock (I know!) and I just said I didn t have one; hence the 100% mortgage. Nothing more was mentioned.

Deposits are not a condition of purchase! (at least not one you have to agree to)

Edited by FlyVintage on Tuesday 16th September 18:09

And yet in the 4 house purchases I have made I have always had to pay something but apart from the first house it was the always in a chain and that’s why I commented on paying the deposit up through said chain.
Perhaps things have changed since our last one ( 20 years ago ) ?
I think legally if a deposit doesn’t happen the seller can still come after you for the quantum and the solicitors will have this written in somewhere.
As such that’s why people don’t exchange only to pull out because it costs them the deposit surely ?

[FlyVintage]

alscar said:

FlyVintage said:

In the situation that the OP describes, there will be no requirement for a deposit .

In all the houses I have ever purchased, the only one that a deposit was even mentioned was my first . I bought that with 100% mortgage from Northern Rock (I know!) and I just said I didn t have one; hence the 100% mortgage. Nothing more was mentioned.

Deposits are not a condition of purchase! (at least not one you have to agree to)

Edited by FlyVintage on Tuesday 16th September 18:09

And yet in the 4 house purchases I have made I have always had to pay something but apart from the first house it was the always in a chain and that s why I commented on paying the deposit up through said chain.
Perhaps things have changed since our last one ( 20 years ago ) ?
I think legally if a deposit doesn t happen the seller can still come after you for the quantum and the solicitors will have this written in somewhere.
As such that s why people don t exchange only to pull out because it costs them the deposit surely ?

If you default post exchange, you would be on the hook for losses to the other party regardless of deposit (or not). Obviously paying a deposit means the other party has access more readily, but it doesn’t change your liabilities.

[Jeremy-75qq8]

Your inbound deposit becomes the deposit on your purchase.

If there is a large disparity then yes you may need to make payment.

[alscar]

FlyVintage said:

If you default post exchange, you would be on the hook for losses to the other party regardless of deposit (or not). Obviously paying a deposit means the other party has access more readily, but it doesn t change your liabilities.

Fair enough - OP needs to quote you rather than me then !

[ewanjp]

In all the houses I've purchased I've always ponied up a 10% deposit on completion - I've been upsizing so had the cash on hand. I thought this was 'just how it worked' - however I discovered that my mate who's also bought several houses, has never done this and the deposit has always come from lower down the chain.

My conclusion is that either way is workable and if you tell the solicitor whether you have the money or not they'll work it out.

[Mark V GTD]

Jeremy-75qq8 said:

Your inbound deposit becomes the deposit on your purchase.

If there is a large disparity then yes you may need to make payment.

As a vendor, is the 'inbound deposit' that you receive 10% of the agreed price or 10% of the equity?

[silentbrown]

Mark V GTD said:

As a vendor, is the 'inbound deposit' that you receive 10% of the agreed price or 10% of the equity?

Buyer has to pay your conveyancer 10% of the agreed price. If you're buying something else, conveyancer puts this towards the 10% deposit you need to pay to your vendor.

If you're not buying something else, solicitor just sits on the deposit until completion.

[Mark V GTD]

silentbrown said:

Buyer has to pay your conveyancer 10% of the agreed price.

Thanks for that - yes makes sense now :-)