TNG Explains: The Difference Between a Deposit and a Down Payment

Understanding deposits and down payments in the first-time home buying process.

Nov 16, 2023


When you’re preparing to buy a house for the first time, a lot of new information comes at you fast. Before you know it, your offer of purchase has been accepted and you’re being asked to put down a deposit. If you’ve never purchased a house before a deposit or down payment might feel a little daunting. This article will help you answer any questions you might have and get you prepared for your next steps.

What is a deposit?

A deposit is required after your offer to purchase is accepted by the seller. A deposit lets the seller know that you’re serious about the purchase. The deposit is often in the form of a certified check and will be held by a third party.

A deposit can be refundable if you put a condition on your offer. A conditional offer means that you are putting in your offer based on the result of your said condition. If the condition is not met, you are allowed to get out of the contract and the full amount of the deposit is returned.

What is a down payment?

A down payment is the amount of money you put towards the purchase of your house. Depending on your region and financing requirements, you may be required to put a down payment of 5-20% of the agreed upon price of the house. This payment is money you need to have on-hand when you purchase the house and will likely be the most expensive upfront cost you will incur.

Do I need to put down a deposit and a down payment?

Yes, both are required, but at different times. The deposit is usually given within 24 hours after the offer to purchase is accepted, while the down payment is required just before you close on the property. During closing, your deposit will be applied towards the home’s total purchase price. The down payment will be a combination of your deposit and any other funds you will personally pay. The rest of the purchase price is typically covered by your lending company.

In short, though made at separate times, the deposit helps make up the down payment of your agreed upon purchase price.