Why Buyers Get Confused
The confusion comes from the same word “deposit” being used to mean two very different things. Buyers often assume that we are referring to their bank deposit when we are advising on how much they need to come up with once the agreement goes unconditional.
What Is an Agreement Deposit?
- Paid under the sale and purchase agreement, usually once the agreement goes unconditional.
- Usually 5–10% of the purchase price, though this is negotiable.
- Held in the agent’s or seller’s lawyer’s trust account until settlement.
- Acts as your skin in the game, showing you are committed to completing the purchase.
- Credited against the total purchase price at settlement.
- Must come from readily available funds (savings or KiwiSaver, if eligible). Usually not bank funded unless the bank has other security in place.
What Is a Bank Deposit (Your Equity)?
- The portion of the purchase price you contribute yourself.
- Typically 20% of the purchase price, though this can be less or more depending on your circumstances (for example, low equity loans for first-home buyers or higher equity requirements for investors).
- The bank lends the balance.
- Can come from savings, KiwiSaver, or a family gift.
Key Takeaway
- Agreement deposit = part-payment due once you go unconditional.
- Bank deposit = your equity contribution.
Both are important but serve different purposes. Knowing the difference helps you plan your cash flow and avoid stress at settlement.
How We Help
At C&M Legal, we:
- Review deposit terms before you sign.
- Ensure the agreement deposit is handled correctly and credited at settlement.
- Work with your bank or broker so your equity and KiwiSaver funds are lined up. Buying your first home is stressful enough. Our job is to keep the money side clear and simple.
To find out more, book a free consultation with us here.
Written by the C&M Legal Property Team
We help first-home buyers and families across Taranaki and Whanganui buy and sell homes with clarity and confidence.