When it comes to buying a property, it is important to consider how much deposit you include in your agreement. Property law and conveyancing can be complex, and it's important to understand the purpose and significance of the deposit. Here we explore the key considerations surrounding the deposit in a property agreement and provide valuable insights to help you make an informed decision.
Understanding the Difference:
It is essential to differentiate between the deposit required by the bank and the deposit mentioned in the property agreement as we use the same word for both. The deposit required by the bank is typically your contribution towards the purchase, whereas the deposit in the agreement serves as a goodwill payment to signify your commitment to buying the property.
Traditionally, a deposit of 10% has been the norm in property transactions. However, it's important to note that you can choose to put any amount of cash you have available as a deposit. Here are some key points to consider when determining the deposit amount:
1. Stay Within Your Means: Only commit to a deposit amount that you have readily available in cash. It's crucial not to over extend yourself financially when deciding on the deposit.
2. Maximum of 10%: While you can choose any amount, it's generally advisable not to exceed 10% of the total purchase price you are offering.
3. Payable on Confirmation: Ensure that the deposit is payable on confirmation, not acceptance. This helps protect your interests incase the agreement falls through before it is confirmed.
4. KiwiSaver Considerations: If you plan to use yourKiwiSaver funds for the deposit, inform the agent. Include a clause in the agreement stipulating that the KiwiSaver funds should be paid directly to the vendor's lawyer instead of the agent.
Determining the deposit amount for your property agreement can be confusing, but understanding its purpose and significance is crucial.Remember that the deposit in the agreement signifies your commitment to purchase the property, while the deposit required by the bank is your contribution towards the purchase. Consider the key points mentioned above and consult professional property lawyers, such as Absolut Legal, to guide you through the intricacies of property law and ensure that your agreement is accurately worded and protects your interests.
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