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Original poster

Anyone who knows about mortgages and selling houses - help!

52 replies

Romitofrincone · 03/08/2023 19:41

We are buying a 800k house. We were clear from the outset with the estate agent that our deposit would be 2.5% of the total price. We are buying as part of a shared equity scheme with my employer. My employer will own 50% of the property and so will we and our deposit is 5 percent of our mortgage and 2.5% of the total value of the house.

Now, after the searches have been done, and we are talking draft contracts, their lawyers have started to dispute the deposit amount saying it should be 10 percent.

The estate agent led us to believe verbally at the time the offer was accepted that our deposit level was ok. We wrote it on the offer form that was shared with the estate agent and we assumed the sellers, and sent bank statements showing the deposit funds were in our account.

Ultimately if the sellers lawyers start demanding a bigger deposit we have to walk away. Am really panicking this is going to happen though I don’t see how this would benefit the seller - our mortgage offer has been approved, my employer is a large organisation, and we have made a good offer on the property that had been on the market for some months.

Can anyone advise?

OP posts:
Original poster
Romitofrincone · 03/08/2023 20:41

Anyone? So stressed about this...would love advice from someone more knowledgeable.

OP posts:
PTAProblems · 03/08/2023 20:43

Are you in England? I've never heard of this set up (I used to be a mortgage broker).

CFornot · 03/08/2023 20:43

I hope you get some answer but I have no idea why vendors are questioning your deposit.

CFornot · 03/08/2023 20:44

Is your employer getting a mortgage or are they paying the 50% of the property out right?

Overthebow · 03/08/2023 20:47

CFornot · 03/08/2023 20:43

I hope you get some answer but I have no idea why vendors are questioning your deposit.

Think it’s because a certain amount is usually held after exchange in case the buyer drops out at that point. The seller doesn’t have to accept a lower deposit if they don’t want to.

Hufflepods · 03/08/2023 20:47

What do the estate agents have to do with your deposit? It should only be between toy and your lender.

A shared equity scheme with your employer sounds utterly stupid.

Overthebow · 03/08/2023 20:53

Hufflepods · 03/08/2023 20:47

What do the estate agents have to do with your deposit? It should only be between toy and your lender.

A shared equity scheme with your employer sounds utterly stupid.

It’s about the amount available as the deposit between exchange and completion. It’s usually specified as 10% in the contract but can be lower if the seller allows.

Original poster
Romitofrincone · 03/08/2023 20:58

It’s not stupid at all, hufepods, but thanks for the constructive feedback. The scheme allows us to buy in an expensive part of England and as my salary and DH’s increases - which it will - we increase our share until we own the property.

My employer will pay outright.

The estate agent definitely gave the impression they had shared the deposit question with the seller at time if negotiations and that it had been accepted.

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Darkandstormynite · 03/08/2023 21:02

I've never heard of this arrangement. I have to ask, what happens if you leave their employment or get fired? what happens to your home?

Bruisername · 03/08/2023 21:04

I think it’s quite unusual for the exchange deposit to be less than 10% and you may struggle with any seller. Can your employer make up the difference?
Bear in mind you will also need to sort insurance from exchange

MRex · 03/08/2023 21:05

They are entitled to require a holding deposit of 10% in case you back out, that's reasonable. You need to ask your employer to pay the 7.5%, with you paying in your 2.5% share. It shouldn't be an issue as they are paying 50% in cash. Your solicitor or their solicitor will hold onto it all between exchange and completion.

Original poster
Romitofrincone · 03/08/2023 21:06

I think it’s pretty unlikely I’ll get fired without being too outing! If I do leave their employ I have two years to pay them the amount they own of the house but I don’t plan to leave, DH and I are both in career paths where expect to be able to assume full responsibility for the mortgage I’m five years.

Anywsy I don’t want to derail this into a discussion about the pros and cons of a shared equity scheme! Just keen to know thoughts on the deposit issue and thanks to everyone who has offered advice.

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TeleTropes · 03/08/2023 21:10

MRex · 03/08/2023 21:05

They are entitled to require a holding deposit of 10% in case you back out, that's reasonable. You need to ask your employer to pay the 7.5%, with you paying in your 2.5% share. It shouldn't be an issue as they are paying 50% in cash. Your solicitor or their solicitor will hold onto it all between exchange and completion.

This. Most sellers expect at 10% deposit as this is generally passed up the chain. You weird buying arrangements shouldn’t affect the seller, so either you put down 2.5% and your employer puts down 7.5%, or the employer puts down the full 10%. If they’re paying cash this should be easy to do. Otherwise you agree simultaneous exchange and completion, but you’d have to convince your seller…

Original poster
Romitofrincone · 03/08/2023 21:12

My employer isn’t going to pay any deposit - the terms of the scheme are clear that the deposit is our responsibility- so if the seller does want 10 percent then we will have to walk away.

Just very frustrating as this has been months - we made our offer in March! And we believed that the sellers had approved the deposit issue then.

From the sellers viewpoint I would have thought it would not make sense for them to withdraw over this. They are buying a bigger house and if they withdraw they’d have to re market their house, it has been on the market for six months when we offered and they had not had any offers and had had to lower the price. So surely they don’t want to put it back on the market.

Just exhausted by the whole thing tbh, it’s been dragging on for so long.

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Original poster
Romitofrincone · 03/08/2023 21:13

It’s hardly a ‘weird’ arrangement, shared equity schemes are quite common.

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likeasongbird · 03/08/2023 21:14

It's about risk. Your seller's solicitor will ask for a larger deposit because it's in her client's interest. If you pull out of the sale after exchange the seller is better compensated by the 10% figure than the 2.5%.

2.5% is low by market standards. You have less to lose by pulling out after exchange (even though this doesn't sound like your intention).

That said, there is no magic number - you can agree whatever terms you like. So if 2.5% deposit was agreed when your offer was accepted that should stand.

It might be that your seller has had an offer accepted on a house and a larger deposit is required on that one... so they need to ask for more from you to meet the demands of their chain?

Bruisername · 03/08/2023 21:14

As pp said - the deposit will b passed up the chain so they may not be able to exchange on their property without your deposit

maddening · 03/08/2023 21:21

Would they accept.a guarantee of the 7.5% as it is only for incase you pull out they would be entitled to demand the 10% - if someone could guarantee the remainder in the event of pulling out then all.is good. I never had a deposit in cleared funds - it was coming from my house sale and that was no issue.

badomens · 03/08/2023 21:21

People at the top of the chain generally have to get what's left and I think it is often not 10%

We upsized and only had about 5% and the buyer had to take it. The is has nothing to do with the loan to equity value of the mortgage.

Yellowlegobrick · 03/08/2023 21:21

A 5% deposit is very low. Your seller will be worrying because property prices are starting to fall, and people with low deposits/affordability issues etc are the most likely to pull out as the exchange approaches because they realise they may be borrowing more than the property is worth.

No seller ever has to sell to you, pre exchange they can pull out for any reason.

MRex · 03/08/2023 21:23

Romitofrincone · 03/08/2023 21:12

My employer isn’t going to pay any deposit - the terms of the scheme are clear that the deposit is our responsibility- so if the seller does want 10 percent then we will have to walk away.

Just very frustrating as this has been months - we made our offer in March! And we believed that the sellers had approved the deposit issue then.

From the sellers viewpoint I would have thought it would not make sense for them to withdraw over this. They are buying a bigger house and if they withdraw they’d have to re market their house, it has been on the market for six months when we offered and they had not had any offers and had had to lower the price. So surely they don’t want to put it back on the market.

Just exhausted by the whole thing tbh, it’s been dragging on for so long.

Awkward. Possible that your vendors didn't know either and are under 10% themselves so don't have a choice. Options

  1. Ask your employer again, just to be clear they really will refuse before you back out.
  2. If they refuse then ask for a future earnings loan of 2.5%, either short term just for the exchange period or long term for you to pay back through salary, if they agree then work out repayments that work for you
  3. If they refuse the loan, ask if the solicitor can hold the funds at exchange, not as a deposit but in order to verify fund receipt to the seller. Then if they say yes, get your solicitor to ask the vendor solicitor if that would be acceptable instead. They may have to pass it up the chain to find someone with 10%, but the verification might work.
Yellowlegobrick · 03/08/2023 21:27

Gosh just re-read and you only have 2.5%. I'm amazed a bank will lend with so much skin in the game with falling prices.

MRex · 03/08/2023 21:28

Whoops, too soon.

  1. Someone mentioned an indemnity above. I've no idea if you xould get an indemnity underwritten in this situation and it may be expensive, but ask your solicitors just to see.
  2. Also extensive, ask your bank for a 7.5% bridging loan only for the exchange period. They should be able to arrange this and will already be aware of the terms. Certainly they would accept if a solicitor verifies that the employer funds have been earmarked for your purchase.
Ohmylovejune · 03/08/2023 21:32

Would exchange and completion on the same day work as all the money should be available that day and they'll have your 2.5 and your employers 50 percent cash that day ready to pass over when mortgage comes through

Original poster
Romitofrincone · 03/08/2023 21:32

We have 5% deposit as far as the bank is concerned as it’s 5 percent of the mortgage we are taking.

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