What Is an Exchange Deposit and When Do You Pay It?
- Khizar Siddique
- Sep 24
- 2 min read
In the conveyancing process, an exchange deposit is a partial payment made by the buyer when contracts are formally exchanged. This is one of the most important stages in a property transaction because it makes the sale legally binding.
🔑 What Is an Exchange Deposit?
It’s usually 10% of the property purchase price, though this can sometimes be negotiated (especially for first-time buyers or new builds).
It's paid at the point of exchange of contracts, not completion.
This deposit acts as a good faith payment — a sign that you’re committed to buying the property.
📅 When Do You Pay It?
You pay the exchange deposit on the day your solicitor (or conveyancer) exchanges contractswith the seller’s solicitor.
Exchange usually happens after all legal work, surveys, and mortgage arrangements are complete.
Once contracts are exchanged, neither party can legally pull out without penalties.
💼 Who Holds the Deposit?
The deposit is usually held by the seller’s solicitor in the firms’ client account but can be requested by the buyer’s solicitor at any time following exchange.
It’s then deducted from the total amount you owe on completion day, when the rest of the purchase price is paid and ownership transfers.
⚠️ What If You Pull Out After Exchange?
If you (the buyer) withdraw after exchanging contracts without a valid legal reason, you’ll likely lose your deposit.
You could also face legal action for additional damages.
If the seller pulls out, they could be forced to proceed or compensate you.
🧠 Example
You're buying a house for £300,000:
At exchange of contracts, you pay a £30,000 deposit (10%).
On completion day, you pay the remaining £270,000, and the keys are handed over.
📝 Key Takeaway:
The exchange deposit is a critical commitment point in the UK home-buying process. You don’t pay it until everything else is in place — but once it’s paid and contracts are exchanged, you’re locked into the deal.
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