Deposit and down payment aren't one and the same: Ask Joe

To be clear, the deposit is the money you pay up front to secure, or commit to, an agreement of purchase and sale for a property. The down ... ADVERTISEMENTperson_outlinecloseSignInsearchcancelPodcastsNewslettersToday’spaperedit_locationTheStarEditionCHANGELOCATIONexpand_moreManageProfilekeyboard_arrow_rightSubscriptionskeyboard_arrow_rightBillingInformationkeyboard_arrow_rightNewsletterskeyboard_arrow_rightSignOutThiscopyisforyourpersonalnon-commercialuseonly.Toorder presentation-readycopiesofTorontoStarcontentfordistribution tocolleagues,clientsorcustomers,orinquireabout permissions/licensing,pleasegoto:www.TorontoStarReprints.comJRByJoeRicherRegistrarRealEstateCouncilofOntarioSat.,Jan.20,2018timer3min.readI’mthinkingaboutbuyingahousethisyear.What’sthedifferencebetweenadepositandadownpayment?Howmuchwilleachonecostme?Muchlikethewords“client”and“customer,”“deposit”and“downpayment”aresometimesusedinterchangeablybythegeneralpublic—buttheyhavedifferentmeanings.Depositscomebeforedownpayments,solet’sstartthere.Adepositisthemoneyyousubmitduringtheofferprocesstosecureapropertyyouwishtopurchase.Thinkofitasagestureofgoodfaithtotheseller.Adepositshowstheselleryou’reseriousandcommittedtobuyingtheirproperty.Itdemonstratesthatyouhavethefinancialmeanstomakethepurchaseandyou’recomfortabletakingonsomelevelofriskuntilthedealcloses.Thereisnostandardamountforadeposit,soIcan’tsayhowmuchitwillcostyou.It’sanissueyourrealestaterepresentativecannegotiatewiththeseller’srep,alongwiththetimingofanypayments.Depositscanbeduewhenanofferismade,onceanofferisaccepted,oranotheragreed-upontime.Thisshouldallbecapturedinthewrittentermsofyourofferandtheeventualagreement.Readmore:Homelistingsnotalwaysaccurate:AskJoeBigdifferenceifyouarearealestaterep’sclient,orcustomer:AskJoeResearchingneighbourskeytobuyingahome:AskJoeIftheselleracceptsyouroffer,thedepositwillbeplacedinatrustaccountuntilitbecomespayable.Thisisusuallywiththeseller’sbrokerage,butthebuyerandsellermightagreetoanotherapproach.ConsumerdepositsareprotectedunderthedepositinsuranceprogrammanagedbytheRealEstateCouncilofOntario(RECO).Theprogramexiststoprotectyouincasethebrokerageislostduetofraud,misappropriation,insolvencyorbankruptcy.Thiscoveragedoesn’tapplytodepositsgivento,orheldby,individualsorcompaniesnotregisteredwithRECO.That’ssomethingtoconsiderifyou’reeveraskedtopayadepositdirectlytoaseller.Oncethedealcloses,yourdepositwillbeappliedtowardsthehome’stotalpurchaseprice.Thedownpaymentisusuallyacombinationofyourdeposit,andanyotherfundsyouwillpersonallypay,whiletherestofthepurchasepriceistypicallycoveredbymortgagefinancing—assumingyouaren’tpayingcashforthehome.Tobeclear,thedepositisthemoneyyoupayupfronttosecure,orcommitto,anagreementofpurchaseandsaleforaproperty.Thedownpaymentisthemoneythatyoupaytothesellertobeeligibleforfinancing.Downpaymentrequirementscanvary,andtheGovernmentofCanadahasestablishedsomeimportantguidelinesonthesubject.IwouldencourageyoutovisittheCanadaMortgageandHousingCorporationwebsite(cmhc-schl.gc.ca),theGenworthwebsite(genworth.ca),ortalktoyourpersonalbankerormortgagebrokerformoreinformation,astherulesaroundmortgageeligibilityhaverecentlychanged.Buyingrealestateisaseriouscommitment.Abuyerwhopaysadepositandthenattemptstowalkawayfromadealmaylosethedepositandpossiblyfacealawsuitforanydamagessufferedbytheseller.Andinmostcases,depositsarenotrefundable.Thedifferencebetweenadepositandadownpaymentisprettystraightforward.Buttherearemanymorerealestatetermsyoushouldunderstandwhenyoubuyahouse.That’swhyIstronglyrecommendworking—asaclient—witharealestatesalespersonwhocanhelpyounavigatethemurkywatersandansweranyquestionsyoumayhave.Ialsostronglyrecommendthatyoualsousetheservicesofalawyerwhoisqualifiedtohandlerealestatetransactions.JoeRicherisregistraroftheRealEstateCouncilofOntario(RECO).HeoverseesandenforcesallrulesgoverningrealestateprofessionalsinOntario.Emailquestionstoaskjoe@reco.on.ca.Findmoretipsatreco.on.ca,[email protected]/RECOhelps.SHARE:ReportanerrorJournalisticStandardsAboutTheStarMorefromTheStar&PartnersMoreLifeTopStoriesCopyrightownedorlicensedbyTorontoStarNewspapersLimited.All rightsreserved.Republicationordistributionofthiscontentis expresslyprohibitedwithoutthepriorwrittenconsentofToronto StarNewspapersLimitedand/oritslicensors.Toordercopiesof TorontoStararticles,pleasegoto:www.TorontoStarReprints.com