How to make the First Deposit on Your Land Purchase
Hi there!
If you are reading this post today, you may be getting ready to make the first deposit on your land purchase. Given this fact, it would be safe to assume that your loan has been approved to purchase your dream property. Congratulations on this milestone!
This is the first stage where money moves from one party to another. You may be wondering a number of things, such as:
- When do I pay the required deposit on my real estate transaction?
- To whom do you pay the deposit to?
- What happens after the deposit is made?
- What should I expect at my deposit meeting?
Keep reading to have these burning questions answered.
When do I make the first deposit & Who do I pay the first deposit to?
Let’s get down to it. Your lawyer will request the funds necessary for the first deposit on your land purchase from your lending agency. This will occur after both the attorneys and their clients agree to the terms and conditions outlined in the Sale and Purchase and Agreement. If you are unfamiliar with what a Sale and Purchase Agreement is, take a look at this blog post for more details on this document. What to expect from your attorney in a property purchase.
If you are buying a parcel of land, the deposit required will most likely be 10% of the cost of the land. However, if you require a mortgage to purchase a home, the deposit will be 5% of the total mortgage cost.
Click the link below which for an explanation of the costs associated with the purchase of land in greater detail. https://thought2realty.com/buying-land-in-barbados-four-initial-costs/
How soon after I sign the agreement, is the deposit requested?
The timeline you experience may be different from what my husband and I experienced. It took us about nineteen business days for this part to be completed. We signed the Sale and Purchase Agreement on March 26th, 2019 at the lawyer’s office. Following this, the lending agency called us on April 12, 2019, to authorize the release of funds for the deposit.
What happens at the deposit meeting?
So, we took a trip down the road 🙂 and met with our account manager. The objective of the meeting was to read and sign the relevant documents needed to release the funds for the deposit. The process for you may be slightly different and hopefully, it takes less time, but it should generally follow the pattern below:
- Firstly, a cheque was drawn up to the vendor’s attorney for the required ten per cent deposit. (We bought a parcel of land).
- After the cheque was drawn up, it went directly to our attorney first. She called us to tell us she received the cheque on April 17th, 2019 and what the next step would be. The deposit cheque was then sent to the vendor’s attorney along with the signed Sale and Purchase Agreement.
- Unfortunately, we did not have enough funds in our savings to make the entire deposit. We, therefore, borrowed the funds necessary to make up the shortfall. As the credit union/bank provides you with a drawdown, you will be required to acknowledge the release of funds by signing a drawdown sheet.
- A promissory note (a document signed by you which indicates your promise to repay what was borrowed) was prepared to outline the funds drawn down and the associated interest to be paid. This is an interest-only payment, this called a bridging payment. There will be no principal payments until the entire amount for the land has been paid to the vendor. However, this only occurs if you have borrowed the 10% deposit from your lending institution. If you are paying the required deposit out-of-pocket, then the bridging payment will not apply to you.
What happens after the deposit is made?
We met with our lawyer some weeks after we paid the deposit to sign additional documents to advance the property purchase. For further details on the additional documents we signed, click the following link, What to expect from your attorney in a property purchase.
SUMMARY
In conclusion, your lawyer will make the request for the first deposit to be made on your land purchase. Remember, this will happen after you have signed the Sale and Purchase Agreement.
Your lending agency will request that you come in to sign documents to release the necessary funds for the deposit to be made.
After the deposit is made, there is a waiting period (not a lengthy one) you will experience before the process continues. :).
