Do you have a good handle on mortgage terms?
Many Canadians have a good understanding of financial services terms. But, a recent Angus Reid survey revealed that only 51 percent of respondents were confident they knew what a mortgage deposit was. 48 percent of respondents suggested they were “not very confident” or “not at all confident” they understood the term.
It’s easy to see why there’s some confusion over the definition, as homebuyers often use the terms “deposit” and “down payment” interchangeably. While they both refer to money put forward in the home buying process, here’s some clarification of each term:
is the initial funds a buyer submits during the offer process. The deposit secures or commits them to a property they wish to purchase. The deposit is usually a gesture of trust and good faith to the seller.
It typically occurs at the time the offer is made, or upon acceptance of the offer. There’s no typical amount for the deposit, although in a hot housing market, an offer with a higher deposit could be more attractive to the seller.
If the seller accepts the offer, the deposit will typically be kept in a trust account — usually by the seller’s brokerage or a lawyer — until it becomes payable.
is the money the buyer pays to the seller to be eligible for financing once the offer is accepted. It’s a lump sum that’s paid out of the buyer’s pocket, not financed through a mortgage.
When the time comes to close on your home, the deposit goes toward the down payment and will be credited toward the home’s purchase price.
Are you planning to make a move this summer? We can help you negotiate the best price for your home.
As always, if you are buying or selling your home do not hesitate to contact Gregg Bamford and Ryan Bamford