You have to pay a deposit at exchange of contracts. This is traditionally 10% of the purchase price. Nowadays, it is occasionally 5%, if you negotiate that. (If you say nothing, the assumption is that 10% will be provided.) The point of the deposit is that it is security for the seller, because the seller can keep it if you default on the contract and don’t complete the purchase.

A deposit can be held by the sellers’ solicitors as ‘stakeholders’ or as ‘agents for the sellers’. If the contract says they hold the deposit as agents for the sellers, then they can simply pay it to the sellers as an advance payment on the purchase price. This would be most unusual in a private sale, but it is often found in sales by developers of new homes – they expect to get deposits as early as possible to reduce their loans.

In deals between private individuals the deposit is usually specified to be held as ‘stakeholders’. This means that the sellers’ solicitors must hold the money as a middleman between the two sides. They can only release the money to the sellers after completion of the sale has taken place. If the sellers fail to complete, then the deposit should be returned to you.

There is one practical exception to the rule that the money is held by the solicitors. If the sellers are themselves buying a property in England or Wales to live in, then the normal rules allow them to use your deposit as part of their deposit on their purchase. (Similarly, if you are selling as well as buying, you may be able to use your buyers’ deposit towards the deposit on your new home.)

If you are getting a 100% mortgage, you need to remember that the lenders will only provide this at completion. Meanwhile, you need to come up with the deposit at exchange. So, you need to fund the deposit from savings, or by a loan from your family, or with a bridging loan from your bank.