At the end of the day both the deposit and the down payment go towards paying for your home but knowing when you pay them is important so you aren’t caught off guard.
The deposit is paid when your offer on a house is accepted. Generally you write a cheque to the Listing Brokerage (ex. Sotheby's International Realty Canada) and then when the paperwork is exchanged between REALTORS the cheque is included. If the offer isn’t accepted and the deal “dies” the cheque is returned to you or destroyed. If the offer is accepted the Listing Brokerage will deposit the cheque into their Trust Account within 3 business days. There is no minimum amount required for a deposit, typically I see deposits for $5000 – $10,000. As the value of the property increases the amount of the deposit usually does too. If you don’t have quick access to that amount of money you will probably want to consider moving your money around in advance so that it is available when you need it. So if you are using RRSP’s or investments of some kind consider selling/transferring them before you start making offers. You don’t want to be caught at the last minute hoping everything is transferred in time for the cheque to be cashed.
The deposit goes towards the total down payment. So if you were planning to put $50,000 down and you wrote a deposit cheque for $10,000 you would then owe $40,000 at closing when the remainder of the down payment is due. Sometimes the down payment comes from equity from the sale of your previous property; it may be cashed in investments, or money you have saved. A few days before closing you usually meet with your lawyer to sign all of the necessary paperwork; this is also when you would write a cheque for the remainder of the down payment. If it’s coming from the equity in your previous property the lawyers usually work with the lenders to transfer the money.
There are other elements that may come into play when you buy a property such as additional deposits and interim financing. All of this can seem complicated in the beginning but your REALTOR should be able to explain everything along with your Mortgage Specialist/Broker. Ask questions and get educated, it’s your money!
