When Do You Pay Deposit When Buying a House?

When Do You Pay Deposit When Buying a House?

Buying a house is one of the biggest financial commitments most people will ever make, and the process involves many important steps. One of the most significant moments in that journey is paying the deposit. While many buyers understand that a deposit is required to secure a property, not everyone is clear on exactly when it must be paid, how it fits into the transaction and what legal protections are in place.

Whether you are a first time buyer or moving up the property ladder, knowing when to pay the deposit and what it represents is crucial. This article explains the timing of the deposit payment, how it relates to mortgage lending and exchange of contracts, and what you need to consider before transferring large sums of money during the home buying process.

What Is the House Deposit and What Is It For?

The deposit in a property purchase serves two key purposes. First, it represents your commitment to the purchase and forms part of the total purchase price. Second, it provides a measure of protection for the seller in case the buyer pulls out after contracts have been exchanged. In most UK property transactions, the deposit paid on exchange is ten percent of the agreed purchase price, although the actual amount may vary depending on circumstances and mortgage arrangements.

This deposit is not the same as your mortgage deposit, although the terms are sometimes used interchangeably. The mortgage deposit refers to the portion of the property value you fund yourself, with the remainder covered by your mortgage loan. For example, if you are buying a house for £250,000 and putting down a twenty percent deposit, you will contribute £50,000 and the mortgage lender will provide the remaining £200,000.

The ten percent deposit typically paid at exchange is drawn from that same contribution, not added on top. It is paid to your solicitor and held until contracts are exchanged, at which point it becomes legally binding.

When Do You Actually Pay the Deposit?

The deposit is usually paid just before exchange of contracts. Your solicitor will request the funds once all legal checks have been completed and both parties are ready to proceed. This is often within a few days or even the same day as exchange, depending on how swiftly the transaction is progressing.

Once your solicitor has all the necessary documents, mortgage offer, local searches and confirmations in place, they will agree a date for exchange of contracts with the seller’s solicitor. At that point, you will be asked to transfer the deposit funds so they can be held in readiness. As soon as contracts are exchanged, the deposit is formally paid to the seller’s solicitor and becomes part of the purchase agreement.

It is important to ensure the funds are cleared and available when requested, as any delay in paying the deposit can hold up the entire transaction. If you are using savings or funds from another sale, plan ahead to make sure the money is in your solicitor’s account in good time.

Is the Deposit Always Ten Percent?

While ten percent is the standard deposit amount paid at exchange, it is not fixed in law and can be varied by agreement between the parties. In cases where buyers are putting down a smaller mortgage deposit or have limited funds available until completion, a lower exchange deposit may be accepted.

For example, if you are using a five percent mortgage deposit and have limited cash upfront, the seller may agree to accept a smaller deposit at exchange, sometimes as little as five percent. This must be agreed in advance and confirmed by both solicitors.

Bear in mind that if you do pay less than ten percent and later withdraw from the purchase after exchange, the seller may still be entitled to claim the full ten percent as damages. This underlines the seriousness of exchange of contracts and the importance of being fully committed before paying the deposit.

What Happens to the Deposit After Exchange?

Once the deposit is paid at exchange, it is held by the seller’s solicitor until completion. It forms part of the total purchase price and is deducted from the final balance due on completion day. Your mortgage lender will transfer the loan funds to your solicitor in time for completion, and your solicitor will then pay the full purchase price, less the deposit already paid.

The deposit is not refundable if you back out after exchange, unless there is a specific clause allowing this in the contract. Likewise, if the seller pulls out after exchange, you may be entitled to claim compensation or seek a court order to force completion.

This is why exchange is such a critical point in the transaction. It marks the moment the sale becomes legally binding and the deposit becomes enforceable.

Paying the Deposit Safely

As the deposit is often a large sum of money, it is vital to take precautions when transferring it to your solicitor. Always double check bank details using trusted contact methods and never rely on email instructions alone. Cybercrime in property transactions is a real and growing threat, and fraudsters frequently target buyers at this stage.

Your solicitor will usually ask you to transfer the deposit using a same day payment system such as CHAPS or faster payments. Make sure the funds are transferred early in the day and that your bank is aware of the purpose of the payment to avoid delays or security checks.

Once the deposit has been received by your solicitor, they will confirm it in writing and proceed to exchange contracts once all parties are ready.

What If You Are Using Help to Buy or Shared Ownership?

If you are buying through a scheme such as Help to Buy or shared ownership, the process for paying the deposit may differ slightly. You may only need to contribute a small initial deposit upfront, with the remainder provided by the equity loan or housing association on completion. However, your solicitor will still need to ensure that sufficient funds are available at exchange to meet the legal requirements of the sale.

It is important to understand how the scheme works and speak with your solicitor early in the process to clarify when payments will be needed and how they should be made.