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Paying 10% deposit when trading up

  • 30-11-2022 3:10pm
    #1
    Registered Users Posts: 373 ✭✭


    This may be a stupid question but when trading up to a new house (selling and buying), how is the 10% deposit (as it will in 2023 for non-FTBs) usually paid?

    We have equity in our house but obviously we won't have this equity realised until we actually sell our house, but we'll want to be moving our purchase along while our house sale progresses if possible.

    Can we not sign contracts on the new house until we have actually sold our house and received the money, and can pay the 10% deposit?

    We wouldn't have enough savings to pay a 10% deposit on a new house without the equity from our current house.

    Thanks



Comments

  • Registered Users Posts: 89 ✭✭blarb


    We're in the same position at the moment - we are sale agreed on both houses. Neither our broker or our solicitor mentioned any issue with using the equity in our house as deposit.

    I spoke with our broker last week about this and he said the solicitor will ensure all goes ok with transfer of funds from the sale of our house toward deposit on new house. I'm still nervous as I'm not sure how it will play out.

    We are hoping to move straight to new house without having to stay with family etc. Might be ambitious but we will see how it goes. Not expecting to close until mid-late Jan but interested to see how others got on!



  • Registered Users Posts: 21,027 ✭✭✭✭ELM327


    We needed to pay the deposit before proceeding. I had it saved up so it wasnt an issue but you can't sell and buy with the equity as a deposit. You need to fund the 10% yourself from savings.



  • Registered Users Posts: 89 ✭✭blarb


    Unless our broker is very bad at his job I don't think this is true!

    We have approval in principle based on our savings as they were (we had enough to pay the booking deposit (€7k in our case), survey, valuation etc but nowhere near enough for the full 20% deposit).

    We are currently waiting on our full loan offer - we have submitted all docs required (basically the valuation on new house and survey which the bank required as it's an old house).

    We have been open with estate agents as we were searching for new home that our offer was subject to sale of our own house.



  • Registered Users Posts: 5,212 ✭✭✭Former Former Former


    It seems you're confusing two different things.

    There is the 20% of the value of your new house that the bank will require you to have in order to grant you a mortgage for the remaining 80%. You absolutely can use the equity in your current house for this.

    However, when you sign the contracts to buy your new house, you'll be asked for a completely separate deposit (usually 10% but depends on the contract) that is paid to the vendor's solicitor who holds it until the sale completes. This absolutely will have to be cold hard cash and if you don't have it, you have an issue.



  • Registered Users Posts: 13,744 ✭✭✭✭Dav010


    Whether you have to pay a 10% when signing the contract does not depend on your broker or solicitor, it depends on what the seller’s conditions are. If they require 10% of purchase price when signing, there is little your broker or solicitor can do about it. As another poster has clarified, in terms of satisfying your lenders deposit requirement, then the equity released from the sale of your home may satisfy their requirements, but the seller may want the 10% cash up front. It is security, if you fail to complete the purchase after signing the contract, your deposit may be forfeit unless the seller agrees to a clause making completion subject to drawdown of the mortgage, many will not agree to such a clause.



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  • Registered Users Posts: 89 ✭✭blarb


    Thanks so much for explaining this, we hadn't heard of this before. But unnerving, but we'll let the solicitors deal with that if it comes to it.



  • Registered Users Posts: 21,027 ✭✭✭✭ELM327


    Thanks. This is what I was explaining above. I even specified the 10% deposit as opposed to final, but I guess I wasnt clear.



  • Registered Users Posts: 89 ✭✭blarb


    I had thought you were talking about the back deposit.

    This 10% deposit for the seller is a complete surprise to me - I knew there was a booking deposit for EA (worked out at 2% of house value for us) and the 20% deposit for the bank. Didn't know sellers would require one too. Disappointed that my broker (or solicitor) didn't mention it and let us get this far. Broker knows we don't have 10% of the house value in cash until the sale of our house goes through.


    The only other time I bought was as a FTB when I had the cash saved. Feeling nervous now. We'll see what happens when the contracts come in for our new house, which should be soon.



  • Posts: 0 [Deleted User]


    Wouldn't you be getting 10% from the buyer of the house you're selling too? Use that



  • Registered Users Posts: 89 ✭✭blarb


    Ah of course. That makes more sense, so some savings needed to pay the difference but not the full whack at least.



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  • Registered Users Posts: 144 ✭✭calgary bound


    The seller won't get this until the sale closes and the solicitor won't let you use this until the sale of your house closes.. Surprised this hasn't come up before. We are in the same process and selling our house and buying another and this was flagged from the outset.



  • Registered Users Posts: 10,082 ✭✭✭✭Dodge


    From my own experience within the last 13 months or so, and from talking to others in the same boat (including on here), most people borrow from friends and family to cover it. Can be easily repaid when equity is released.

    Our solicitor suggested we contacted vendor to see if they’d waive the 10% and he could furnish a letter to say we had equity to be released and all moneys were ready to go (mortgage etc). We had had a few delays so didn’t want to risk that

    FWIW, our payment was 10% less the booking deposit we had already paid (€8k in our case). So depending on the price, you might have already paid a little-to-decent bit of the 10%



  • Registered Users Posts: 6,400 ✭✭✭SteM


    It's not yours to use until the sale of your house is completed.



  • Registered Users Posts: 89 ✭✭blarb


    Yes I'm surprised too. The reason I went with a broker was because I knew we hadn't got the cash for anything more than the booking deposit and valuation fees etc, and he gave me no indication that it would be a problem. Very disappointed.

    We can figure something out hopefully.



  • Registered Users Posts: 21,027 ✭✭✭✭ELM327


    Your solicitor would have that funds and is not permitted to release them to you



  • Registered Users Posts: 89 ✭✭blarb


    Thanks for this, our solicitor will hopefully do the same, or if that fails we can ask family/friends as you have suggested to fund the difference until the funds are in our account.



  • Registered Users Posts: 677 ✭✭✭Sir Galahad




  • Registered Users Posts: 12,890 ✭✭✭✭Geuze



    Three payments to buy a house:

    (1) pay booking deposit, usually 5k or 10k

    (2) pay the balance of 10% at signing of the contracts, this must be in cheque / bank draft / cash (not borrowed)

    (3) at closing, pay the 90%. The 90% may be funded by a mix of your own savings / mortgage / equity released from sale of house


    I bought house 2 before I sold house 1, so I funded some of the 90% with a bridging loan from parents.



  • Registered Users Posts: 107 ✭✭henryd65


    I was in this position a while back.

    I had some savings, but not enough, and was able to borrow from the credit union on a short term loan basis the balance needed for the 10% deposit. I provided copies of the sale and purchase agreements to help with the application.

    The buyers of my property only realised late in the day about the 10% deposit requirement so I reduced the 10% portion to I think 7% to enable the sale to proceed.

    All progressed as planned and the credit union loan was repaid within one month.



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