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Are there two deposits I need to pay?

There is often a bit of confusion around deposits for your new purchase - we talk about deposits, and so do Real Estate Agents and Lawyers - what does this all mean, and are they all different things?

Short answer (and good news) - no, they are all part of the same overall deposit amount!

When we talk about your deposit, we refer to the portion of your new home's value that you'll contribute. So for a $400K house, you might contribute 20%, which is $80K.

This is the total amount that you'll pay personally towards the purchase, and it might be made up of some Kiwisaver/Superannuation, savings, a gift from parents, or the Home Start Grant (as of September 2019, referred to as First Home Grant).

You may have heard that when you sign an agreement to purchase a property, there is also a "deposit" required. This is not a separate deposit. It's usually around 10% of the purchase price (which in our above example will be $40K), and this is normally paid to a Real Estate Agent's Trust Account when your purchase has been confirmed (we call this unconditional, see this blog for some more detail here). This forms part of your total $80K, so once you've paid this you'll have another $40K to pay on settlement, which is the day you officially own the property!

​We're also often asked, "how do I pay my deposit to the bank?"

Actually, you don't need to pay the bank...

On settlement, your lawyer collects all the money (the total amount for the purchase) into what they call a "Trust Account". This is a special "holding account" where they receive the money you've loaned from the bank, and your remaining deposit funds (either savings directly from you, or money from your Kiwisaver account), which they then use to pay the vendor (the person selling) on the day you've agreed for the sale to take place.

Hopefully this clears up any confusion around how deposits work - get in touch with us today to learn more about how to go about buying your first home. We'll be here for the whole journey and will make the process smooth and easy for you!

And we promise there will only be one deposit.

Adam, Claire and the My Mortgage Team


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