DEPOSIT Money you give (usually) 24 hours within acceptance of your offer.
Purchase Price: $500,000:
*Almost always this is made payable to the listing brokerage and held in trust.
* There is no hard and fast rule as to how much you have to give for the deposit. But typcially it is not lower than 5% of the purchase price. This ensures that the buyer doesn't walk away after a deal is firm & also show you're commited to buying the home.
*Deposit goes towards the downpayment of your purchase.
Down Payment This is the amount of cash you have set aside to put down on your purchase. Your downpayment is paid on the closing day.
Purchase Price: $500,000
= $400,000 this is the amount you will need a mortgage for.
Now here is the long version...
A deposit, as it relates to real estate, is money that is included with a purchase contract, as a sign of good faith. It is the “”consideration”” that helps make up the contract. It’s what is used to bind you to the contract. Typically, when you make an offer to purchase on a property, you would include a certified cheque or a bank draft that gets held by your real estate brokerage while negotiations are being finalized. If your offer is accepted, the deposit is then placed “in trust” where it is held until just before your mortgage closes. The final step is when the deposit is transferred to the lawyer’s trust account and is included as part of your downpayment.
If you aren’t able to reach an agreement, the deposit is then returned to you. However if you come to an agreement, and then you back out of that agreement, your deposit is forfeited to the seller. Now, although the deposit is separate from the downpayment in that it’s money that goes ahead of the downpayment in the negotiation of the purchase, once everything is finalized, the deposit is then included in and makes up part of the total downpayment.
When the seller accepts your offer, the next lump sum you’ll need to shell is on your down payment. Your down payment is paid on closing day. Your down payment is the money you’ve scrimped and saved over the last few months or years to buy a home.
Down payments sizes can vary. If you’re fortunate enough to be able to afford to buy your home in cash, your down payment will be the same as your purchase price. If you’re like most homebuyers and need a mortgage, your mortgage amount will be the difference in purchase price and down payment.
The minimum down payment you can make in Canada is 5 percent. If you make a down payment between 5 percent and 20 percent, your mortgage is considered high-ratio and you’ll have to pay mortgage insurance premiums. If your down payment is greater than 20 percent, you’ll qualify for a conventional mortgage and avoid costly mortgage insurance premiums.