Do You Know What a Down Payment Versus a Deposit Is?
Have you ever wondered what the difference is between a down payment and a deposit? Maybe you're looking to buy your first property but feel confused about these two similar yet different terms.
You'll hear each term thrown around quite often during the initial house hunting process, and that's because purchasing a home requires both a down payment as well as a deposit. Scary stuff, right? Well, it's actually quite simple, and I explain below exactly what each term refers to!
What do they mean?
To put it simply, a deposit is an amount of money you use to secure the home you're looking to purchase, whereas a down payment is the money you put "up front" when you actually purchase the home.
What's the real difference?
When it comes to the deposit, there's typically no set amount you are required to pay; rather, the deposit shows you are serious about securing the purchase of the property, and the deposit is also applied against the purchase of the property once it closes.
Down payments can range in price, but the purpose of this payment is purchasing the home. Not all down payment requirements are the same, however, your Realtor will be able to walk you through the amount you'll have to put down.
Is there a catch?
What many first time home buyers don't realize when they enter into the process of buying property is that the deposit is lost if the sale of the home does not close.
That's why it's critical to understand exactly what it is you're looking for in a property and the type of home you need prior to jumping into a home purchase. Given that the deposit is lost if you choose not to purchase the home, it's important to know what your perfect property "looks" like.