One of the property terms that can be confusing is the word “deposit”, especially among first-time buyers who have previously been renting.

For example, consider this statement: “When Jake got his deposit back he had enough for his deposit, although this was not enough to cover his deposit.”

There are three uses of the word “deposit” that, unless understood in their respective context can be perplexing:

  1. The “rental” deposit. This is the amount of money held by a landlord or letting agent as security against damages and is returned to a tenant at the end of the tenancy, subject to the property being returned in good condition.
  2. The “mortgage” deposit. This is the difference between the purchase price of a property and the amount of mortgage available on that property. So, if a buyer qualifies for a 95% mortgage (ie 95% of the agreed purchase price) they would need to have raised a “deposit” (or “cash” even though this may not be physical pound notes) for the remaining 5%.
  3. The “Contract” deposit. When contracts for the sale of a property are exchanged (ie the deal becomes binding) is it usual for a sum of money to be put down prior to the whole amount becoming due on completion a few weeks later. This contract deposit is usually 10% of the purchase price. However, it is not uncommon, for practical reasons, for the amount actually required on exchange to be for a smaller amount, or even nothing, as a concession, even though should the buyer fail to complete, the full 10% would still become payable contractually.

So the strange statement above might now be better understood as meaning: “When Jake got his rental deposit back he had enough for his mortgage deposit, although this was not enough for his contract deposit.”

Please feel free to contact your local Oakfield branch should you ever have any questions about the terminology or processes involved in buying or selling a property. We’re here to help!


Neil Newstead, FARLA MNAEA

Chief Executive Officer