Apply For Deposit For Purchase Loan
What is a Deposit for Purchase?
Once you have made the decision to buy a home after having done all the necessary checks to see everything is in order, the next step is to reserve the property by making a deposit for the purchase. A deposit of purchase is when the buyer pays the seller a certain amount, which reflects the buyer's good faith in purchasing the property. The amount deposited for purchase ensures the buyer has more time to arrange for funds and further inspect the property before closing the deal. A deposit of purchase is also called - money of goodwill. Upon making a deposit of purchase, the buyer signs a precontract agreeing to the deposit for purchase amount with the seller. The contract must be in writing containing all the points that need to be stated. It also includes how both parties will continue to work together until the final sale contract.
How It Works
How does a deposit for purchase loan work?
A deposit for purchase loan guarantees the seller that you will pay the funds when the purchase is completed. When you make a deposit for purchase, you are also showing that you have the financial capability to make the purchase, and you do not mind taking on certain risks until the deal is completed. However, in some instances, most deposit for purchase loans are non-refundable if the conditions have been fulfilled or waived. A deposit can only be made while making an offer. Once the offer is accepted, the payment can be made in staggered installments. This should all be mentioned in writing in your eventual agreement.
When do you have to present the deposit?
You will be expected to make an upfront cash deposit when purchasing the property. This indicates that you are wholly committed to buying the property. And once the sale is completed, you can redirect the funds deposited towards your down payment or closing costs. The deposit placed is as a sign of good faith money by the buyer towards the seller for a property purchase. It is an integral part of the home buying process to ensure it goes as smoothly as possible. You ideally have to present the deposit within 24 hours of acceptance of the purchase. It is vital that you, including your agent, mention in the precontract that the deposit is due within 24 hours to ensure that you have time to sort out funds and inspect the property. If you are unable to finance the purchase, you can make alternative arrangements for the deposit. As a bargaining tool, it is ideal to have your deposit for purchase in hand to express to the seller that you have readily available funds to buy the house. The deposit for purchase is usually 5% of the purchase price, and the seller usually does not counter your deposit amount.
Advantages of a deposit for purchase:
When you make a deposit for purchase, it shows to the seller that you have the finances to make the purchase and are also comfortable taking on some level of risk until the deal is completed. It is also a fantastic way to ensure that you are prepared to take on costs that are associated with owning a house.
Making a deposit for purchase significantly improves your chances of having your housing loan application approved by traditional lenders, which puts you in a comfortable position to negotiate with them for more convenient terms.
One of the major benefits of making a deposit for purchase is that when applying for a loan, the buyer is seen as providing equity into the deal, thus reducing the bond amount. The banks look at this deal more positively and will lessen the installment as they borrow a lower amount. With the loan amount being reduced, you are also reducing the home loan interest amount in the long run.
Putting down a deposit for purchase does not only improve your chances of having your loan application approved, but will also put you in a favourable position to negotiate for a much better interest rate. Over time, this will reduce the amount of interest the buyer will have to pay on the loan.
Putting a deposit for purchase for a home loan will further decrease the interest rate and monthly installments, allowing the buyer to repay the amount quickly. The overall value of the loan when paying for a deposit for purchase is smaller, giving you the opportunity to pay it back sooner.
Saving for a deposit for purchase mentally prepares the buyer for loan repayment. It exhibits the commitment of the buyer that will ensure they fulfil the obligation of making scheduled monthly repayments in the long run.
To find out more information on deposit for purchase loans or to schedule an appointment with us, please do not hesitate to reach out to Harpreet Puri Mortgage at 416 543 9000
Proudly Serving Ontario, Canada
- Deposit For Purchase Loan Toronto
- Deposit For Purchase Loan Brampton
- Deposit For Purchase Loan Kitchener
- Deposit For Purchase Loan Brantford
- Deposit For Purchase Loan Ottawa
- Deposit For Purchase Loan Mississauga
- Deposit For Purchase Loan London
- Deposit For Purchase Loan Oshawa
- Deposit For Purchase Loan Cambridge
- Deposit For Purchase Loan Waterloo