Down Payment vs Deposit

Down Payment vs Deposit

A deposit, in the form of a bank draft or a direct wire, is the initial cash required to secure a purchase of real estate once you have removed your subjects (Eg. Subject to financing, a Home Inspection, approving documents) or immediately upon acceptance of your offer. A deposit is generally 5% of the purchase price ($50,000 for a million dollar property).

Those funds are held in a trust account of your realtor's brokerage and go towards the amount owing for the purchase. It is part of the down payment

A down payment is the TOTAL amount of funds that the buyer puts forward themselves to go towards purchasing a property. The rest of the funds come from the mortgage, the amount you borrow from a lender/bank. So if you buy a property for $1,000,000, the deposit, the rest of the down payment (cash you have saved) and the mortgage (money borrowed from the bank) all add up to the purchase price.


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