When you’re buying your first home you will need to put in a deposit, unless you have a guarantor helping you with the purchase.
Regardless if this deposit is 5% or 20%, there can be confusion around when do you pay this deposit and how do you get the money back, so in this blog I thought I would answer those questions for you, starting with, when do you pay the deposit…
When do I pay my deposit?
When you sign a Contract of Sale you would typically put down a small amount of your deposit to show you are serious about your offer. This amount is usually $1000 and gets paid into (and stored) the real estate agents trust account.
When your contract becomes ‘unconditional’ in that, you have a lender who has issued you with a Formal Approval and you’re happy with the building and pest report, then you usually pay the remaining of your deposit.
This is paid at this point because, should you cancel the contract for any reason, the vendor (the person selling the property) can keep all or a portion of your deposit.
Who do I pay the deposit to?
The real estate agent is the person who collects the deposits along the way. They store the funds in their Trust account for the day of settlement. This is a legal requirement to protect you and the vendor.
When do I get my deposit back?
This depends on where you are in the home buying process, for example, if you paid the first ‘smaller’ deposit and you’re unable to get finance, or the property fails the building and pest, then you can get your deposit back when you cancel the contract.
When you pay the larger portion of your deposit, when your contract becomes unconditional, you don’t get that deposit back. What will happen is on the day of settlement, the amount required to purchase the property will be the agreed purchase amount, less the deposits you have paid.
If you are a first home buyer who would like to buy your property in the next 6-24 months then the first place to start is The First Home Buying Program. This program is specifically for First Home Buyers to guide them through the steps and what they need to be working on before they start applying for finance or going to open homes. To find out more click here.
As always, if you want to chat to me about buying your first home you can book a time here.
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