The term down payment is often confused with the term deposit and this is a question that a lot of First Time Buyers ask.
When you make an offer to purchase a property, the owner and the listing agent will expect you to provide a deposit in the form of a personal cheque, a bank draft, a certified cheque, or a money order. A deposit is a sign of sincerity and security by the person making the offer and the deposit money will be applied against the purchase of the home when the sale closes.
Deposit amounts vary across different markets and price points. In Durham Region deposits are typically between $1000 and $10,000. However, the amount is completely negotiable. The deposit is most often held in trust by the listing broker until closing or other termination of the agreement.
The down payment is the amount of the buyer’s own money that they will be putting towards the purchase price of the property. The current minimum in Ontario is 5%, however 5% is only available to qualified buyers. The down payment is payable upon closing.
The total of your mortgage, your down payment and your deposit should equal the total selling price.
Therefore, a deposit is given when the buyer indicates a desire to buy the property and a down payment is given when the buyer has actually purchased the property.