The deposit is generally 10% of the purchase price. However, it can be any amount agreed by you and the seller.

It is usually paid on the exchange of contracts, or when you sign the contract, if you buy at auction.

Where is the deposit held?
The seller's agent, solicitor or conveyancer will usually hold it.

If the money is in an interest bearing account, check the contract to see what happens to the interest on this money.

How is the deposit released?
Normally it is released at settlement.

The seller may want the deposit to put towards their next purchase and may therefore ask you to release the deposit before settlement. To do this they will usually include a special condition in the contract.

Mortgage insurance
Lenders commonly require buyers to pay for mortgage insurance, particularly when they borrow 80% or more of the purchase price.

Should I insure the property?
You should think carefully about insuring the property after you exchange contracts. Although it is not strictly necessary until settlement, you are entitled to have insurance from the time of exchange. Check with your solicitor.

Remember, you might have to take out your own insurance after the exchange of contracts because:

  • you might not be able to check the seller's policy, and it is unwise to rely on the seller's word that the level of insurance covers the value of the property or that the insurance is maintained up to the date of settlement;
  • the bank you are arranging a loan with might insist on this;
  • or the mortgage documents can insist you take out insurance.

Last updated - April 2010