When purchasing real estate there is often confusion about the difference between real estate deposits and down payments. So what is the difference?
Deposits
When purchasing real estate, the deposit is the money that you put down to secure the property. Whenever a buyer makes an offer for the purchase of real estate the contract provides for a deposit. Deposits are typically 5% of the purchase price and are payable as a bank draft or wire transfer at the time of subject removal. It is typically held by the Brokerage of the Buyer’s Agent. It is held in trust and released to the lawyer prior to the Completion Date. Lastly, these funds form part of the Buyer’s down payment.
Down Payments
In real estate the down payment is the total cash amount you will be using to purchase a home. It is the Purchase Price less the mortgage amount. If you are obtaining an uninsured mortgage, you will be required to have a down payment of 20% of the Purchase Price. However, if you qualify for a CHMC insured mortgage the minimum down payment required is 5% on the first $500,000, 10% on the amount between $500,000 and $1,000,000 and 20% on the balance over $1million. The balance of the down payment is payable upon completion.
If you would like more information on the buying process take a look at our Home Buying Guide.
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