What is a holding deposit?


Are you still a little bit unclear on what stage of the home buying process you will need to pay a deposit at, and how much you’ll need to pay? In this post, let us walk you through what a holding deposit is and when it will be due.

What is a holding deposit and why do I need to pay it?

A holding deposit (not to be confused with a home deposit) is a fully refundable payment designed to give an indication of a buyer’s intent to go through with the purchase of a property. It is typically paid by the prospective purchaser to the seller for a property being transacted through a private sale, not an auction.

The exchange of a holding deposit allows the vendor to see the purchaser’s serious intent. For the buyer, it can be a way to secure a property you are really excited to purchase. The holding deposit is typically around 0.25 per cent of the purchase price, but this can be negotiated. As per the NSW Fair Trading, the holding deposit will be set at a default of 0.25% because this is the figure the purchaser will be obligated to pay the vendor if they withdraw from the purchase for any reason. In the case that the purchaser changes their mind, the 0.25 per cent will be due regardless of whether it was paid as a holding deposit or not.

If there are any issues with the sale before contracts are exchanged, it is fully refundable (more detail on this later).

How good? Image credit: Todd Kent on Unsplash

When do I need to pay a holding deposit?

The holding deposit is typically paid before contracts are exchanged. When contracts are exchanged, the remaining 9.75 per cent, or whatever the balance of the 10 per cent now is, is added to the home deposit and the sale will go through like any other (at the conclusion of the cooling-off period, if applicable).

We hope you’ve gained some clarity on what the purpose of a holding deposit and when you’ll need to pay it as part of your home buying journey. As always, if you have any further queries, feel free to contact BFG and we will respond promptly.
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstances and requirements.

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