Deposit
In the property market, a deposit is an upfront payment made by the buyer to the seller as part of a real estate transaction. This payment signifies the buyer's commitment to the purchase and is typically a percentage of the property's total purchase price.
What is a Deposit?
A deposit in the property market serves as a critical financial commitment and forms an integral part of the home buying process. It is paid by the buyer to either the seller directly or into an escrow account, acting as evidence of the buyer's intention to complete the purchase. The size of the deposit can vary, but it is commonly between 5% to 20% of the property's sale price, depending on the buyer's financial circumstances, the specific terms of the mortgage, and the requirements of the lender.
This initial payment is crucial for several reasons: it secures the buyer's interest in the property, provides the seller with assurance that the buyer is serious about the transaction, and influences the mortgage terms offered by lenders. A larger deposit generally results in more favourable mortgage rates because it reduces the lender's risk. After the deposit is paid, the buyer and seller proceed towards closing the sale, at which point the deposit is applied towards the total purchase price of the property.
Frequently Asked Questions
Deposit is a term that you may have heard before, but you might not be sure what it means. Here are some common questions and answers to help you understand what it means.
