Deposit vs Down Payment
Most of the home buyers, especially first-time home buyers looking to purchase a house or a condo in Montreal, do not know the difference between the deposit and down payment, and they become puzzled when they get to that stage of the buying process. In this article, we are going to explain the main differences between a deposit and down payment and respond to any questions you might have related to them. Let’s get started!
What does down payment mean and deposit?
A down payment is the fund you need to secure the mortgage from the bank. If you are a first-time home buyer or the property will be your primary residence, you will need 5% of the purchase price. However, if the property you intend to purchase won’t be your primary residence and you are purchasing it for investment purposes, you will need to have 20% of the purchase price. Let me give you an example to make it clearer.
Question: Mr. Adam wants to purchase a property listed for 400,000 CAD, and the property will be his primary residence. How much down payment would he need to pay?
Answer: Mr. Adam will need to have 5%, which is equivalent to 20,000 CAD, to purchase this property. The rest (380,000 CAD) will be financed by the bank as a mortgage loan.
A deposit is money you pay the seller in advance to show your seriousness .
What is a deposit on a house offer?
A deposit is a money you pay the seller in advance to show your seriousness to the seller.
Does a deposit go towards payment?
Yes, the deposit directly goes towards the payment. For instance, if you put a 5,000 CAD deposit down for a house, it means that the money you will owe for the house will be 5,000 CAD less than the agreed price if the transaction goes through.
Is down payment same as deposit?
Definitely not. The deposit is the extra fund you need to pay upfront to show your seriousness to the seller. It will not decrease the amount of the down payment you will need to pay for the transaction
A down payment, is the combination of your deposit and any other money you pay toward the agreed property price.
Is a deposit part of the full price?
Yes, the deposit is part of the full price. The amount you pay as the deposit will be deducted from the total agreed price of the property.
What is the deposit on a house in Canada?
The average deposit when buying a house in Canada is 5 to 10K depending on the value of the property.
Can i get my deposit back if I do not end up purchasing the property?
It will depend on how your real estate agent has drafted the purchase offer. If your offer was conditional to a satisfactory home inspection report or there were other conditions, and the deposit had to be given before all these conditions are fulfilled, then you can get your deposit back from the seller if you choose to withdraw from the deal. If the offer is drafted differently, you might not be able to get your deposit back. To avoid possible conflicts, it would be wise to work with a real estate broker who will represent you in the deal ( buyer’s agent) who is up to date with all the legal procedures. Most brokers do not charge any fee when representing buyers in a real estate transaction.
You can contact me if you need assistance with buying a property in Montreal, and I would be glad to help you with the whole process.