92% mortgage but 10% deposit required?

MrThrifty

Right, nothing too unusual here. I'm buying a house with a 92% mortgage but a 10% deposit is required. Clearly my 8% savings together with 2% of the loan will make up the 10% deposit required. But... while I can pay the 8% now from my own savings, nothing will be binding in terms of contracts etc. until the full 10% deposit is paid.

So what normally happens in this situation? Does the outstanding 2% deposit end up getting paid together with the remaining 90% loan amount on the actual closing date? In which case, is there not an issue here as the seller can just walk away at any time before then and return my deposit?

killers1

MrThrifty wrote: »

Right, nothing too unusual here. I'm buying a house with a 92% mortgage but a 10% deposit is required. Clearly my 8% savings together with 2% of the loan will make up the 10% deposit required. But... while I can pay the 8% now from my own savings, nothing will be binding in terms of contracts etc. until the full 10% deposit is paid.

So what normally happens in this situation? Does the outstanding 2% deposit end up getting paid together with the remaining 90% loan amount on the actual closing date? In which case, is there not an issue here as the seller can just walk away at any time before then and return my deposit?

Ask your solicitor to contact the vendors solicitor to say you are borrowing 92% finance and will they accept an 8% contract deposit. In 99.99% of cases this won't be an issue and when you sign the contracts you just pay 8% less you initial booking deposit. If they were to insist on the full 10% then you would pay 10% of the purchase price less initial booking deposit and then when your mortgage cheque issues it will be for 92% of the price but you will have paid 10% so the remaining 2% is reimbursed to you. The solicitor route is the way to proceed and they shouldn't have an issue accepting 8% on signing the contracts...

killers1

just to clarify on the last part of your question - the mortgage monies are sent to your solicitor and they arrange to pay the balance of the purchase price to the vendors solicitor on closing. At no time will the vendor or their solicitor have 102% of the purchase price in their hands!

MrThrifty

Sound - that makes sense... I wish solicitors would consider adopting 8% as the standard deposit amount given that 92% mortgages are quite common with first time buyers!

killers1

MrThrifty wrote: »

Sound - that makes sense... I wish solicitors would consider adopting 8% as the standard deposit amount given that 92% mortgages are quite common with first time buyers!

True. It was even more confusing in the 100% finance days!!!