August 13, 2012
What is the standard deposit amount on a home purchase?
“What is the standard deposit amount on a home purchase in Toronto?”
5% is a rule of thumb, but it obviously depends on the situation. However, as our market has been a seller’s market for the last while, I disagree that that is a maximum; in bidding wars in particular I have seen deposits of well over 10%. Some sellers don’t care that much (as others have pointed out, it doesn’t change what you pay for the property as it all goes to the same place!) However, others DO…and if you want your offer to be taken seriously, why would you take a risk? We have had sellers accept a lower offer because it had a higher deposit, and they were concerned about the ability to close the offer with only a few thousand bucks’ deposit.
The reality is, a larger deposit shows:
1) you are financially capable
2) you are serious about the deal, as it is your “skin in the game.” If you were to skip town or renege on the deal, it’s what you stand to lose (at least). If your deposit were $100, really you aren’t sticking your neck out much, and what impression will that make?
If you can give more for a deposit without undue financial strain, we suggest doing so. It’s just one less thing for sellers to object to in your offer. A nice round number close to 5% is fine; if you are in a bidding war, I’d put as much as you can easily do…after all, you’re paying now or paying later, why not make your offer seem stronger, even if it’s only some sellers that will perceive it as such?