Exchange deposits in a chain

[NIsense]

Appreciate some help on this.

I need clarification on exchange deposits (not mortgage deposits) and how they work in a chain.
Im selling my house to buy another. My house has sold for £125K. The house Im buying is 95K. Im in a chain as my buyer is relying on the sale of her house also to fund the purchase of my house, to then allow me to buy my next house. Like me, she needs a mortgage to buy my house. So at exchange of contracts, and since I am downsizing moneywise (125K to 95K house), I take it I do not have to fund the usual 10% exchange deposit from my own bank account to fund my onward homes exchange deposit? All my equity is in my house btw. I am assuming my buyers buyer passes forward the 10% exchange deposit through the chain to me and onto my vendor that is. Is that correct? Of course it might not be 10% but I'll cross that bridge if I come to it.

Yes, deposits work their way up the chain sequentially. Your buyer’s solicitor will transfer £12.5k to your solicitor, who in turn will transfer £9.5k to your vendor’s solicitor (assuming 10% deposits for each property). Since your buyer’s deposit exceeds your deposit then you shouldn’t need to transfer your solicitor anything yourself for exchange. The surplus of £3k will presumably be kept by your solicitor on account until completion, to be topped up by the your equity and mortgage

@2thumbs

Yes, deposits work their way up the chain sequentially. Your buyer’s solicitor will transfer £12.5k to your solicitor, who in turn will transfer £9.5k to your vendor’s solicitor (assuming 10% deposits for each property). Since your buyer’s deposit exceeds your deposit then you shouldn’t need to transfer your solicitor anything yourself for exchange. The surplus of £3k will presumably be kept by your solicitor on account until completion, to be topped up by the your equity and mortgage

2thumbs - many thanks. So just to be absolutely clear - I dont need to have a 10% exchange deposit in savings or from a loan or whatever, as its passed up the chain from below to me and beyond?

If your deposit is from equity then no you don't need to produce the physical cash on exchange.

And only if the chain agrees.

@SeasonFinale

And only if the chain agrees.

Now wondering why the chain would not agree! The equity should cover everything up to me then thru to my vendor since Im selling a house thats of greater value than the one Im buying. Therefore according to 2thumbs and girlofnow, I should not have to reach into my pocket at all for the exchange deposit

Because you’re downsizing you shouldn’t need any additional funds to exchange (your solicitor should be able to confirm this, to put your mind at ease) - the deposit that you receive from your sale should exceed the deposit that you pay on your purchase. This isn’t true when upsizing, hence additional funds are required to make up the shortfall here

@2thumbs

Because you’re downsizing you shouldn’t need any additional funds to exchange (your solicitor should be able to confirm this, to put your mind at ease) - the deposit that you receive from your sale should exceed the deposit that you pay on your purchase. This isn’t true when upsizing, hence additional funds are required to make up the shortfall here

2thumbs thank you very much for your clear answer. I feel much better now, so thanks again :)

No worries. I wish my vendor had had your forethought to check when I moved recently. They were upsizing by a value of around £300k but failed to realise that they needed to make up the shortfall in their deposit. Luckily exchange was only delayed by a couple of days as a result whilst they found the cash

@2thumbs

No worries. I wish my vendor had had your forethought to check when I moved recently. They were upsizing by a value of around £300k but failed to realise that they needed to make up the shortfall in their deposit. Luckily exchange was only delayed by a couple of days as a result whilst they found the cash

Thanks again. I guess I better make sure the exchange deposit is going to cover my vendor then!

We have recently downsized and where buying cash from sale. We didn’t have to pay deposit, the first person in the chain did that and it’s moved up the chain. Good luck with your move.

I'm doing similar. I'm downsizing. My buyers didn't quite have the full amount for the 10 percent deposit but it was sufficient to make my deposit on my purchase so I allowed it.

If my vendor is buying a much more expensive house (Say 150K) than what I am paying for his house (95K), is he likely to accept my 10% exchange deposit of 9.5K when he needs 15K?

I didn't realise there was such a thing as an exchange deposit. I assumed that once contracts were exchanged you were obliged to proceed with the sale and only paid a % if you pull out.

The exchange deposit is a chain thing that is used to keep a chain in place. Usually 10%. In my case at exchange of contracts, the buyer of my house (sold for 125K) passes forward 10% or 12.5K to my solicitor. Since Im downsizing to 95K (my onward purchase), my solicitor takes 9.5K of the 12.5K (gained from my buyer), and uses that for me to proceed with my purchase. This is a downsizing example only!

Yes you need only pay the 10% deposit. Your vendor will either have to find the difference or come to an agreement with who they are buying off for them to accept a smaller deposit. Even if they did agree to that it usually remains the case that the remainder of the 10% becomes payable should completion not take place

@SeasonFinale

Yes you need only pay the 10% deposit. Your vendor will either have to find the difference or come to an agreement with who they are buying off for them to accept a smaller deposit. Even if they did agree to that it usually remains the case that the remainder of the 10% becomes payable should completion not take place

HI. Thanks. If my vendor did agree to take a smaller deposit, I don't understand why completion would not take place

Unfortunately from time to time for whatever reason chains still break after exchange. But please do not worry unnecessarily about this - it is extremely rare.

Thank you all for your comments and reassurances throughout