What Is the Normal Deposit on Exchange of Contracts

When buying a property, one of the essential steps in the process is the exchange of contracts. This is the stage when both parties legally commit to the sale, and it usually involves the payment of a deposit. But what is the normal deposit on exchange of contracts, and how much should you expect to pay?

In the UK, the standard deposit on exchange of contracts is 10% of the property`s purchase price. This means that if you are purchasing a property for £200,000, you would need to pay a deposit of £20,000 at the time of exchange. However, the actual amount of the deposit can be negotiated between the buyer and seller, and in some cases, a smaller deposit of around 5% may be agreed.

It`s worth noting that the deposit is usually paid to the seller`s solicitor or conveyancer, who will hold the funds in a special account until completion, which is when the remaining amount of the purchase price is paid and the property ownership is transferred to the buyer.

If you are purchasing a property with the help of a mortgage, the lender will often also require a deposit, which can be separate from the deposit on exchange of contracts. This is usually a percentage of the purchase price, and the amount required will depend on the lender and the type of mortgage you are taking out.

It`s important to note that if you are buying a property that is leasehold, the deposit on exchange of contracts may be higher, as there may be additional costs associated with the property, such as ground rent and service charges. Similarly, if you are purchasing a property that is considered high risk, such as one that requires significant repairs or has a short lease, the deposit on exchange of contracts may also be higher.

In conclusion, the normal deposit on exchange of contracts is 10% of the purchase price, although this can be negotiated between the buyer and seller. If you have any questions about the deposit or the process of buying a property, it`s always recommended to seek the advice of a solicitor or conveyancer, who can guide you through the process and ensure that everything runs smoothly.