Why do I need cash now when I’m buying with Zero Down?

Why do I need cash now when I’m getting cash back at closing?

Why do I need cash now when my family is gifting me money at closing?

These are all fair questions, but ones that only consider the closing date and not the subject removal.

The term down payment is often confused with the term “deposit.”

The deposit & the down payment are two different parts of the buying process that generally occur at two different times of the contract.

When you enter into a contract to purchase a property, once subjects have been removed, the owner will expect you to provide a deposit by way of a bank draft, certified cheque or money order. The deposit money is usually held in trust by the listing brokerage on behalf of their Seller, and will form part of the closing statement that is sent to the lawyer or notary

The Deposit is payable upon subject removal, whereas the down payment is payable at closing.

The down payment is a combination of your deposit along with the remaining dollar value of funds that make up the difference between your purchase price and the amount of mortgage on the property you are buying.

If you happen to be buying with zero down, you may want to request as low a deposit as possible. It is then credited back to you at closing anyway.

Please leave your comments below.

Mark Fidgett
Vancouver Mortgage Broker
Owner www.NotaPennyDown.com