The Deposit
A deposit is the money you provide when making an offer on a property, showing your commitment to the purchase. It should be readily available when you start viewing homes and writing offers. Typically, the deposit is provided as a bank draft made out to your agent’s brokerage "In Trust" (e.g., Remax Crest Realty, In Trust). Depending on the contract, the deposit is usually due either upon or within 24 hours of subject removal. If subjects aren’t removed, the deposit isn’t required. The deposit protects the seller if the buyer backs out without a valid reason, and including it with your offer strengthens your position as a serious buyer in a competitive market.A typical deposit in the Greater Vancouver resale market is 5% of the purchase price, though the amount of the deposit is not fixed. In a market like Vancouver, a seller will typically expect at least a 5% deposit when reviewing offers and may expect more depending on if the property is in a multiple offer scenario.
The Down Payment
A down payment is the total amount of money a buyer contributes toward purchasing a property. It bridges the gap between the purchase price and the mortgage loan. The down payment is what the buyer pays upfront (excluding closing costs) to complete the purchase.The amount of the down payment varies based on lender rules and the property’s value. In British Columbia, there’s a minimum down payment requirement, typically 5%, but it can range from 5% to 20% or more of the property's value.The down payment is calculated as:Purchase Price – Mortgage Loan Amount = Down Payment
While both the deposit and down payment involve money and are crucial in the home-buying process, they serve distinct purposes. The deposit shows your commitment and protects the seller, while the down payment is your initial financial stake in the property, influencing your mortgage and overall financial picture.Understanding these differences can help you navigate your home purchase with confidence, ensuring you're prepared for each step of the process.