10% contract deposit always required?

Hi again,

Another question. I am wondering about something I read about the contract deposit. I am planning to take a 100%mortgage and I have enough saved to cover stamp duty, legal feels, surveyor and a booking deposit of 5K.
Then I read that after sale is agreed and after forking out the booking deposit (usually 5K) that on signing the contract it is usual to hand over 10% of the purchase price as contract deposit. In case of a 350,000 Euro house, that would be 35K (minus 5K booking deposit 30K then). Is this always the case, or is it different for 100% mortgage buyers? I know that BOI has something in place where they lend you the deposit upfront at a higher interest rate of course, but none of the other lenders do that.

Does anyone know if this contract deposit is always required or are there ways around this?

10% is fairly standard

Petal said:

I know that BOI has something in place where they lend you the deposit upfront at a higher interest rate of course, but none of the other lenders do that.

Does anyone know if this contract deposit is always required or are there ways around this?

Click to expand...

AFAIK, most lenders will offer you a bridging loan, or allow you to draw 10% of the mortgage (We received a bridging loan for around 3 months, and someone I know was able to draw on 10% over a year in advance of completion).

If you can't get bridging (eg if you are changing lenders), the vendor may accept less than 10 percent as a deposit, along with your letter of loan approval. It's worth asking anyway. I have heard that it happens a lot now. After all, not all of us have 35K plus knocking around....

We negotiated a deposit of 8% as our mortgage was 92%. I think some deposit is fairly standard.

When 10% was requested from us we informed them that we would need to take a bridging loan to finance it and in the circumstances would they go ahead with out it and they did. It did unfortunately mean that we weren't in a such a strong position when it came to closing - they messed us about and kept changing the date, but we kind of had to put up with it because we didn't have the argument of having to take a loan out for the period. I'm just really pointing out that there are con's aswell as pro's for not paying the contract deposit.

Thanks guys,

I also found an older thread that deals with this issue, and I learnt that most of the 100% mortgage lenders are happy to give you an upfront, although at a higher interest rate. I think Bank of Ireland are the only ones that give you that charging the mortgage interest.

I also read that some solicitors are happy to go without the deposit in the light of a 100% mortgage approval. So I just have to wait and see... At least now I know that I have to ask the banks about this option, too when I enquire about the mortgage.

Most 100% lenders will fund the deposit, either by way of a personal loan or a stage payment drawdown of the mortgage. Alternatively you (or your solicitor) can negotiate a lower deposit - 10% is traditional but not mandatory. On my last purchase I paid £1000 in total and stuck that on a credit card for the 2 weeks between signing and completion!

Sarah

www.rea.ie

Thanks for that Sarah, I live in hope!

Petal,
Am in the same situation as you and the vendors solicitor has agreed there will be no 10% deposit. I will hopefully close before the end of the month. It took a bit of negotiation and explanation and they aren't entirely happy with the arrangement but it hasn't stopped us from progressing. They know if it came to it I could apply for the bridging finanance and get it based on the loan offer of 100% so as long as I could prove I had the offer they reluctantly agreed.