Those purchasing a property within the GTA are required to provide a deposit check to the selling party’s listing brokerage. By completing this task you, as the buyer are showing the seller that you are a motivated buyer and you have the money to complete the deal on time and in keeping with all fiscal requirements.
Deposit checks are considered one the leading mechanisms for helping buyers seal the deal in their property transactions.
How Much Should I Deposit?
The amount of your deposit is primarily dependent upon the purchase price of the property. For example, if you’re buying a property valued by the seller at $150,000, then you might be required to deposit an amount ranging from $5,000 to $10,000. However, if the property is valued at $600,000, you will be required to deposit a far larger amount, which could severely affect your budgeting plans.
When a property is considered especially popular on the market (especially in high-value areas such as the GTA) then sellers may ask for as much as 5% of the property price to be placed as a deposit.
Of course, this will likely affect you as a buyer, because you will have to provide a large amount of money before completing the property purchase. This makes it even more imperative for buyers to consider their choice of property before they finalize a deal.
Is a 5% Down Payment Too Much?
The answer to this key question depends heavily on the specific circumstances behind the particular property transaction.
It’s important to remember that in order to qualify for a mortgage you have to show the lending company that you have free capital available for the down payment. These days, the minimum down payment that can be made on a property is 5% of the purchase price.
If there any adjustment to be made to the price, they will be factored in buy the lawyers of both the buying and selling parties at closing. And here we come to another important cost to consider – closing costs. It’s vital that include in your budget a significant amount to pay for all closing costs of the deal.
Could I Factor The 5% down payment and Closing Costs In to my Mortgage Agreement?
Most of the time, the answer to this question will unfortunately be NO. Usually, lending institutions will not allow you to include the 5% down payment and the closing costs within your mortgage agreement. You will have to have the fiscal resources to pay both the 5% down payment and the closing costs of the transaction within your account to conclude the purchase.
Note: Depending on the lender, the money for the closing costs will be required to be held in your account for a certain period of time, which varies from 30-90 days. This process ensures further security for the lender to ensure that you’re able to pay the costs involved in completing the property purchase.