What Is The Difference Between Deposit & Down Payment?
(January 26, 2015
)
Ask The BC Home Hunter Group: Difference between Deposit and Down Payment?Mortgage terminology can be confusing, especially for first-time buyers. Our real estate team can answer any of your questions and guide you through any and all areas of the purchasing and sale of your home or property.
There are different down payment requirements when you are purchasing. If you are an employee, you can put as little as 5 per cent down payment. For self-employed individuals it can be as low as 10 per cent and if you are purchasing a rental/ investment property you will need to put a minimum of 20 per cent down payment. The full amount of the down payment is payable when the sale closes.
Here are a couple of examples:
BC Home Hunter Example 1:
The buyers are buying a property with a purchase price of $500,000. They will be putting a 10 per cent down payment ($50,000). They remove subjects and the offer becomes a firm offer on January 27 and they will be closing on March 4. They immediately pay a deposit of $25,000 to secure the property. The buyers will need to pay the balance of the down payment on the closing date, another $25,000, for a total down payment of $50,000.
BC Home Hunter Example 2:
The buyers are buying a property that is under construction and the developer is asking for a 10 per cent deposit. The property that they are purchasing is $619,900 plus GST. They have given a deposit of $61,990. The final purchase price with GST is $650,895. However, the buyers are only putting down a down payment of 5 per cent ($32,544.75). Therefore, the buyers will get back the difference on closing.
Q: What is the difference between a deposit and down payment and at what point in the process is each paid?
A: The deposit is the money that you put down to secure the property that you are purchasing, in other words you are proving that you are serious about buying the property. There is no set amount on how much the deposit amount is. When you are writing an offer to purchase with any of our real estate team's Realtors, they will require a deposit amount. That amount depends on the purchase price and how quickly you will be closing on the sale. The deposit is applied against the purchase price of the property when the sale closes. The deposit will become part of the down payment. If the sale does not close, the deposit is lost.
The down payment is the money that you put up front when you purchase a property. Down payments typically range from 5 per cent to 20 per cent of the total value of the property.
A: The deposit is the money that you put down to secure the property that you are purchasing, in other words you are proving that you are serious about buying the property. There is no set amount on how much the deposit amount is. When you are writing an offer to purchase with any of our real estate team's Realtors, they will require a deposit amount. That amount depends on the purchase price and how quickly you will be closing on the sale. The deposit is applied against the purchase price of the property when the sale closes. The deposit will become part of the down payment. If the sale does not close, the deposit is lost.
The down payment is the money that you put up front when you purchase a property. Down payments typically range from 5 per cent to 20 per cent of the total value of the property.
As a rule our real estate team believe that the larger the deposit the stronger our buyers offer is, especially in a multiple offer scenario in our hot lower mainland real estate market. The minimum down payment required to purchase a property is 5 per cent.
There are different down payment requirements when you are purchasing. If you are an employee, you can put as little as 5 per cent down payment. For self-employed individuals it can be as low as 10 per cent and if you are purchasing a rental/ investment property you will need to put a minimum of 20 per cent down payment. The full amount of the down payment is payable when the sale closes.
Here are a couple of examples:
BC Home Hunter Example 1:
The buyers are buying a property with a purchase price of $500,000. They will be putting a 10 per cent down payment ($50,000). They remove subjects and the offer becomes a firm offer on January 27 and they will be closing on March 4. They immediately pay a deposit of $25,000 to secure the property. The buyers will need to pay the balance of the down payment on the closing date, another $25,000, for a total down payment of $50,000.
BC Home Hunter Example 2:
The buyers are buying a property that is under construction and the developer is asking for a 10 per cent deposit. The property that they are purchasing is $619,900 plus GST. They have given a deposit of $61,990. The final purchase price with GST is $650,895. However, the buyers are only putting down a down payment of 5 per cent ($32,544.75). Therefore, the buyers will get back the difference on closing.
We hope some of this information has shed a little light on deposits and down payments. Don't hesitate to call, email or text our real estate team at any time with your questions or our complimentary home and property market evaluation, 604-767-6736.
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