When Do You Pay Deposit When Buying a House

Buying a house involves several important financial steps, and one of the most significant is paying the deposit. For many buyers, this can feel confusing, especially when trying to understand the difference between a mortgage deposit and the deposit paid on exchange. Timing matters, and knowing when and how the deposit is paid can help you plan your finances and avoid any delays in the buying process.

This guide explains when you pay the deposit when buying a house in the UK, who it is paid to, how much is required and what happens if things go wrong.

What is the deposit when buying a house?

The term "deposit" can refer to two different things in a property transaction. The first is the mortgage deposit, which is the amount you contribute from your own funds toward the purchase price. This is usually between 5 and 25 percent and is paid as part of the completion process.

The second is the exchange deposit, which is the amount paid to the seller’s solicitor at the point when contracts are exchanged. This is typically 10 percent of the purchase price, although it can sometimes be negotiated.

Both deposits are crucial, but it is the exchange deposit that buyers need to pay earlier in the process, before completion takes place.

When is the exchange deposit paid?

The exchange deposit is paid just before exchange of contracts. Exchange is the moment when both buyer and seller commit legally to the sale. Once contracts are exchanged, neither party can pull out without financial penalties. At this stage, the buyer is usually required to pay a deposit to confirm their commitment.

Your solicitor or conveyancer will request the deposit funds from you a few days before exchange. This is held in a client account and transferred to the seller’s solicitor once contracts are exchanged. You will typically need to transfer the funds by bank transfer, and your solicitor may ask for proof of where the money came from in line with anti-money laundering checks.

How much do you pay at exchange?

The standard exchange deposit is 10 percent of the agreed purchase price. For example, if the house costs £300,000, you would usually pay £30,000 at exchange. However, in practice this amount can be negotiated. Some sellers will accept a lower deposit, especially if you are putting down a larger mortgage deposit on completion.

First-time buyers or those buying with a smaller deposit may negotiate to pay as little as 5 percent at exchange, but this must be agreed in advance. The seller’s solicitor may ask for evidence that the remainder will be available on completion.

What is the difference between the exchange deposit and the mortgage deposit?

The exchange deposit is an early part-payment that forms part of your total purchase price. The mortgage deposit refers to the full amount of your own money that is being used toward the purchase. This includes any help from savings, gifts or Help to Buy schemes.

For example, if you are buying a home for £300,000 with a £60,000 deposit and a £240,000 mortgage, you might pay £30,000 at exchange and the remaining £30,000 on completion. Your solicitor will coordinate these amounts and ensure the full funds are in place on the day of completion.

When is the full payment made?

The full balance, including the remainder of your deposit and the mortgage funds, is paid on completion day. This is when ownership transfers from the seller to the buyer, and keys are released. Your solicitor will arrange for the money to be transferred to the seller’s solicitor and confirm that the transaction has completed.

Before completion, your solicitor will give you a final statement of account. This will include the outstanding balance of the deposit, the mortgage amount, legal fees, Stamp Duty and other associated costs. You will need to ensure the full amount is cleared in their client account ahead of completion.

What happens if you pull out after exchange?

If you pull out after exchange of contracts, you will usually lose your deposit. The seller may also be entitled to claim damages for breach of contract. This is why it is essential to have your mortgage offer in place, surveys completed and finances arranged before proceeding to exchange.

Similarly, if the seller pulls out after exchange, they can be taken to court and required to pay compensation or cover costs incurred by the buyer.

Conclusion

The exchange deposit is typically paid shortly before contracts are exchanged, usually at 10 percent of the purchase price. It acts as a sign of commitment and becomes legally binding once exchange takes place. The rest of your deposit and the mortgage funds are paid on completion day. Understanding when to pay your deposit helps you avoid delays, stay in control of your finances and move forward with confidence in your house purchase.