Philippa Rudd - EDP Property Column. Deposits

We have been saving for a house deposit; how much is actually required for a purchase?

The contract which you will enter into with the seller states that 10% of the purchase price is payable on exchange of contracts.

Our lender is offering a 95% mortgage but we only have 5% with which to offer. Is this going to be a problem?

You should let your conveyancer know this as soon as possible, so that they can agree the reduced deposit with the seller’s solicitors to avoid delays later in the transaction.

What happens to our deposit money on exchange? Will it be kept by our solicitors?

The 10% deposit is sent to the seller’s solicitors’ client account on the day of exchange. The contract states that the seller’s solicitors must hold the deposit. This means that the solicitors cannot part with the money to the seller until completion, when the net sale proceeds are released.

My solicitors say that the seller wants access to the deposit after exchange has taken place. What should we do?

Such an arrangement would require a variation of the contract in order for the seller’s solicitors to hold the deposit as “agent”. This means that the seller can demand the monies from the solicitors prior to completion. However, you should be aware of the risk that, in the event of the seller failing to complete, you may have difficulty in recovering the deposit. Essentially, the seller could disappear with the monies! If you are buying a brand new property, the deposit will normally be paid to the builder on exchange of contracts.

My parents might want to help make up the full 10% deposit. Is this permitted?

‘Gifts’ by relatives, towards a first property, are very common at present. You should let your conveyancer have full details as soon as possible because they will need to check the mortgage lender’s conditions in order to comply with any specific instructions they have regarding the same. Your conveyancer will also have various elements to satisfy in this regard, for instance money-laundering checks. The deposit must still be available for exchange of contracts.