10% Deposit with Contract

O

oblib

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Alright - so a little while ago we went sale agreed on a home here in Cork.

We just got an update by post from our solicitor after their solicitor sent a letter to him saying they we're preparing the title and subsequently the contracts.

However in the letter to us from our solicitor he says "also at this point you should bear in mind that the vendors usually look for a 10% deposit to be sent to them upon signing of the contract".

How do I go about arranging that in terms of when I start my mortgage repayments. I would have thought the day I get the keys is when the money for the house is exchanged and thus when interest begins accruing.

Lastly, I know I could just ask the solicitor but since its the weekend I wanted a chance to clear this up now.

~Thanks~
 
You are responsible for providing 10% on sigining-this is standard in any contract of this type. If you don't have this in cash, you will have to borrow. The bank will not let you draw down the mortage until nearer the time the property is 'sold' (you need to have all insurances in place, survey etc).

In some cases, the bank will give you a bridging loan. In others, you will have to find the money some other way (savings, another bank, Credit Union, family member). If you can't come up with 10%, ask your solicitor if the vendors are willing to accept a smaller deposit.

When you receive the mortgage funds, you then repay the 10% loan.
 
Thanks CCOVICH - just to be 100% clear, this is different from say the 8% I will have to put down on the mortgage itself (assuming 92% loan), correct?
 
Think of it in very simple terms.

House is (e.g.) 200K. In addition you may have stamp duty and you will deffo have solicitors fees, VAT and outlays. So for simplicity, say that the cost of the house is 220K including your transaction costs. None of this covers decoration or furnishing - but you either allow for that or make do with what you have.

If you get a mortgage, it will ordinarily be only for a maximum of 100% of the value of the house - which is 200K. Anything else you have to fund yourself with your savings or a loan from someone else. 92% of 200K is 184K. 8% is 16K.

Now, you pay a booking deposit to the auctioneer when you first agree the deal. You later sign contracts ( and it is only then that the deal is legally binding) and it is at this stage that you pay a further sum the total of which (with the earlier booking deposit) amounts to 10% ( or less if you agree it with the vendor) of the price. So thats 20K. And you have to come up with that - your bank/lender may advance it but as this is before you complete the purchase, they tend to be a little unwilling.

So its good to (a) have an idea of the process and (b) be in funds to pay things or else be lucky enough as some people have been to totally wing it and pay nothing to anybody until completion ( this is the final part of the conveyancing transaction) when you pay the balance of the purchase price ( funded by your mortgage) and your stamp duty and your fees. At/after completion, you are entitled to keys and vacant possession of the property and your solicitor gets the deeds. You only get the keys when you pay the funds.

mf
 
Hi oblib,

Don't get too hung up on the 10%. We were asked for 10% on signing for house purchase. We didn't have that amount up-front, but we did have 7% to offer. That was accepted and there were no hassles. This deposit is really just some form of 'goodwill' comfort to the seller, because if you pull out after signing you will lose this deposit.
 
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