The term “deposit” has two meanings when buying a property. When you apply for a mortgage, the lender will wish to know what “deposit” you have available, i.e. the difference between the purchase price and the amount the lender is prepared to lend you. This will probably differ from the “deposit” required at exchange of contracts to make the contract binding and to act as a sign of good faith by the buyer to the seller. This deposit paid at exchange of contracts is usually 10% of the purchase price. It is paid to the buyer’s conveyancing solicitor shortly before exchange of contracts so that the solicitor has cleared funds ready to pay to the seller’s solicitor at exchange of contracts. The deposit acts as compensation for the seller should the buyer fail to complete the transaction on completion.
The deposit can sometimes be less than 10% of the purchase price if this is agreed by the parties. This will often occur when the buyer is also selling a property and a lesser sum is being offered in that sale transaction.