Second time buyer how does it?

jellybe · 2024-04-21T07:15:53+00:00

We are looking to move to our next home in the next year or so and aren't currently on the market, but I'm not really sure how it works in regard to deposits etc. we don't have substantial amounts of money to hand it is all tied into our current property we have a lot of equity in the current property. With this in mind how does it work in terms of paying the deposit on the next house as obviously we won't have the equity until we sell our current property. Hope this makes sense and isn't a really stupid question.

Changingplace · 21/04/2024 08:20

The deposit is the equity, it’s all handled by your solicitor so that when your house sells the equity is put down against the new house, you don’t need that money separately.

You can also pay your solicitor fees from the equity, that’s what we did when we moved, although you will need to pay for searches and surveys up front.

Karmatime · 21/04/2024 08:22

That’s how a chain works - the deposit upfront comes from the bottom of the chain - either your buyer or your buyer’s buyer etc depending how long the chain is.
Usually your deposit, solicitor fees and stamp duty are deducted from the proceeds of your sale on completion.
You will need to find search fees and survey costs up front which on average in total is around £1000 plus possibly a deposit for removal costs nearer the time.

Original poster

jellybe · 21/04/2024 08:23

Thank you! That makes so much sense not sure why I'd got my self all twisted about it 😂

OP posts:

Twiglets1 · 21/04/2024 08:26

As others have said, you don’t need a deposit once you have equity in a property.

Only the FTB at the bottom of the chain has to actually provide a deposit of 10% or whatever- that money then travels up the chain at exchange of contracts.

It is all quite hard to explain but you don’t need to worry about it.

shockeditellyou · 21/04/2024 08:38

In general you don’t need to worry about it as your equity covers the deposit. That said, it is not guaranteed. Your buyer will at some point have to state that they are happy with not having a cash deposit (as in, on the date of exchange, they won’t have 10% cash sitting in a house) and if the chain goes tits up and you can’t complete, you have to find that money.

Say your house is sold for £200 000. Your buyer (a FTB) gives you £20K cash deposit on exchange. The house you buy is £500 000, so in theory you should pay £50K cash as deposit, but instead you give £20K cash (from your buyer) plus some equity. If your buyer doesn’t want to accept that equity then you do need to find some cash, but your solicitors should handle all this.

i know this because we thought we were passing the deposit up the chain, and had confirmed with our solicitors, and got a phone call on exchange day asking where the rest of our deposit was. We got it sorted in the end but it was a miserable few hours!

Original poster

jellybe · 21/04/2024 08:50

shockeditellyou · 21/04/2024 08:38

In general you don’t need to worry about it as your equity covers the deposit. That said, it is not guaranteed. Your buyer will at some point have to state that they are happy with not having a cash deposit (as in, on the date of exchange, they won’t have 10% cash sitting in a house) and if the chain goes tits up and you can’t complete, you have to find that money.

Say your house is sold for £200 000. Your buyer (a FTB) gives you £20K cash deposit on exchange. The house you buy is £500 000, so in theory you should pay £50K cash as deposit, but instead you give £20K cash (from your buyer) plus some equity. If your buyer doesn’t want to accept that equity then you do need to find some cash, but your solicitors should handle all this.

i know this because we thought we were passing the deposit up the chain, and had confirmed with our solicitors, and got a phone call on exchange day asking where the rest of our deposit was. We got it sorted in the end but it was a miserable few hours!

Oh wow that must have been so stressful. Thanks for that will definitely keep that in mind and make sure that the solicitor is on it for that.

OP posts:

Cotswoldbee · 21/04/2024 10:50

We moved a couple of years ago and for some reason the deposit did not come up the chain but luckily we had substantial savings and a quick trip into the bank saw it funded by ourselves.
Never did find out what the problem was (not really an issue as we worked around it) but if we hadn't got the money, the chain would have been incomplete.
For us it was an annoyance but for others it could have been a catastrophe.

Changingplace · 21/04/2024 11:25

Cotswoldbee · 21/04/2024 10:50

We moved a couple of years ago and for some reason the deposit did not come up the chain but luckily we had substantial savings and a quick trip into the bank saw it funded by ourselves.
Never did find out what the problem was (not really an issue as we worked around it) but if we hadn't got the money, the chain would have been incomplete.
For us it was an annoyance but for others it could have been a catastrophe.

Wow stressful! I’ve never heard of that happening -no way most people would have enough savings to cover it, lucky that you did but I think a quite unusual situation.

Cotswoldbee · 21/04/2024 11:33

Changingplace · 21/04/2024 11:25

Wow stressful! I’ve never heard of that happening -no way most people would have enough savings to cover it, lucky that you did but I think a quite unusual situation.

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Yes, our solicitor did say it was unusual but they (rightly or wrongly) did not push it as they knew we had sufficient accessable funds to cover it.
I guess that if we were reliant on the money coming up the chain they would have done something?

Bunnyasmyname · 21/04/2024 12:53

Interesting responses, thanks people from enlightening me.
i was a second time buyer and didn’t even think about any of this.
(Example figures) but I just assumed the £50k on my £100k equity would be the deposit on my £200k house. So all I needed to do was sort a new mortgage out for the remaining £150k.
Never even thought about the other bits! Very naïve I guess, but unless you think of asking these questions…

Hope all goes well OP.