- Buyers usually need to pay a portion of the sale price to the seller before settlement day, or provide a 'deposit bond' that guarantees it will be paid on settlement.
- That's usually smaller than the full amount you'll be paying up front.
- Sometimes sellers will request a 'holding deposit' as part of the buying process, but these aren't compulsory.
- Deposits are generally transferred electronically.
Getting a deposit together is often the biggest barrier for aspiring home owners. It can be extremely difficult, so it's entirely understandable to not have given any thought to what the logistics are when you have finally saved enough. Once you've saved up enough, here's what you need to know about how paying a deposit works.
When do you pay the deposit when buying a house?
In a private sale (or private treaty) the buyer generally pays an initial deposit to the seller (held in a trust account until settlement) after the contract of sale, an amount typically specified in the offer letter. This doesn't have to be the full amount you're paying up front, but is typically paid within a few days of the contract being finalised. Once settlement day rolls around, you pay the rest of your deposit, and your lender will pay the seller the rest.
At auction, the contract is signed immediately once the hammer falls, so the seller's deposit is expected on the day. Sellers usually request a 10% deposit, but may require a larger one - this will be specified prior to the auction.
How much is a deposit?
Here's how much a 5%, 10%, or 20% deposit is based on the average house price in the eight capital cities as of January 2026:
City 5% deposit 10% deposit 20% deposit Sydney $79,950 $159,900 $319,800 Melbourne $49,450 $98,900 $197,800 Brisbane $57,500 $115,000 $230,000 Perth $50,200 $100,400 $200,800 Adelaide $48,600 $97,200 $194,400 Hobart $38,350 $76,700 $153,400 Darwin $35,750 $71,500 $143,000 Canberra $51,700 $103,400 $206,800 Australia $49,700 $99,400 $198,800 Source: Cotality
Read more: How to save for a deposit
How to pay a house deposit
Deposits go to the seller, not your lender. There are a few different ways you can make this payment:
Cheque: At the time of writing, you can pay for a deposit by writing the buyer a cheque for funds to be drawn from your personal account. Alternatively, the bank could issue a bank cheque, where the funds are drawn from the bank, but this will incur a fee. The Government has announced plans to axe cheques by 2030, so if you're old school you've only got a few years left to familiarise yourself with the alternatives
EFT (electronic funds transfer): Deposits can also be paid via direct bank transfer. If your bank has a limit to the size of online transfers, you might need to get in touch to have the limit temporarily raised. It's also very important to be extremely careful when entering the seller's details, as recouping funds sent to the wrong account can be an ordeal.
Read more: What to do if you've transferred to the wrong account
Deposit bond: A deposit bond is an instrument issued by an insurer which guarantees the seller that the deposit will be paid on the settlement date. If the buyer is unable to pay the deposit on settlement date, the insurer will cover the seller for the full value of the payment. Deposit bonds are common in off-the-plan purchases and with investors whose funds are tied up in illiquid assets. Some sellers may not accept deposit bonds, since they may need the money right away to buy their next home.
What about cash?
Unfortunately for the Walter Whites and Tony Sopranos of this world, agents aren't likely to accept a bag of physical cash as a deposit. A cash deposit is usually viewed as unnecessarily inconvenient, not to mention pretty suspicious.
House deposit vs holding deposit
A holding deposit is a portion of the full deposit that buyers pay as part of their offer to signify their serious intent to buy the house. It's different to a conventional deposit - it will normally be far smaller, and the seller is still able to entertain alternative buyers. Holding deposits are typically 0.25% of the offered price, but this can vary between states.
Holding deposits can be fully refunded if the seller accepts a separate offer (i.e. you were gazumped) - it's important to get a written confirmation of this from the agent. There are no refunds for other costs though, such as conveyancing fees, valuation fees, and inspection costs.
Real estate agents often request holding deposits from buyers, but they are not compulsory. While they can make you stand out from other prospective buyers, there's a danger that the agent just wants to use your holding deposit as a bargaining tool to secure a higher offer from another buyer.
What happens after you pay the deposit
Once the contract is signed and the deposit is paid, the money is typically held by the agent in a trust account until the property's settlement day - when the ownership officially passes from the seller to the buyer. Settlement day is also when your lender fronts up the full funds to buy the property, and officially registers the mortgage.
Cooling-off period
Contracts are legally binding after they're signed, although for private property sales there may be a cooling-off period for the buyer. A cooling-off period is the time during which a buyer is allowed to cancel the contract and get their deposit refunded. Ordinarily, there is no cooling-off period for buying at an auction.
If the property's state or territory has a cooling-off period, this begins after the contract is signed by both parties. Correct at the time of writing, these are the different standards around the country regarding cooling-off periods for private property sales:
| State | Cooling-off period | Penalty for cancellation |
|---|---|---|
| NSW | 5 business days | 0.25% of purchase price |
| VIC | 3 business days | 0.20% of purchase price |
| QLD | 5 business days | 0.25% of purchase price |
| WA | None | n/a |
| SA | 2 business days | Up to $100 |
| TAS | None | n/a |
| ACT | 5 business days | 0.25% of purchase price |
| NT | 4 business days | n/a |
Settlement period
After a cooling-off period has passed, property sale contracts become unconditional. Cancelling an unconditional contract can have severe ramifications, so talk to a lawyer before you consider doing this. It's normally a pretty good idea to insist upon a 'subject to finance' clause, which means that the contract is void if you can't get the loan you need. Without this, if you do get rejected for finance you are still obligated to buy the property, and the seller might be able to take legal action against you for subsequent loss, as well as keep your deposit.
Read more: Buying property unconditionally
On settlement day, which can be over a month after the contracts were first signed, the buyer's conveyancer/solicitor meets with the seller's conveyancer/solicitor and a representative from the bank to exchange contracts and finalise the transfer of the remaining sale funds. After that, the buyer will be notified that they can pick up the keys from the real estate office and start paying off that mortgage.
Risks to understand before paying the deposit
Property deposit scams
Deposit scams are becoming increasingly sophisticated and buyers can stand to lose tens or even hundreds of thousands of dollars if they’re not careful.
Scammers may intercept emails between a buyer and their conveyancer or agent, then send fake bank details that look completely legitimate. If a buyer transfers their deposit to the wrong account, the money is often gone for good.
For that reason, it’s critical to verbally confirm bank details with your conveyancer or agent before sending any funds - never rely solely on details in an email.
Buyers should also be wary of last‑minute changes to account numbers, urgent payment requests, or anything that feels out of the ordinary during the settlement process.
Can you get a refund?
After the cooling off period you generally can't get a refund on your deposit unless the contract of sale has a clause that provides circumstances that would void the contract - subject to finance, subject to building and pest inspection are two of the most common. If you try to pull out of the sale, the seller may be able to keep your deposit and take further legal action to recover any other losses.
Savings.com.au's two cents
For most people, a property deposit is the single biggest amount of money they have ever transferred or written a cheque for. It's very important to double check all the details to make sure you aren't accidentally sending money to the wrong account.
Even if you're confident you're sending money to the seller, it can still be daunting to actually send the money over. Making sure there's a subject to finance clause, and that you've done all the inspections (or included relevant subject-to clauses) can give you peace of mind, helping you feel confident that you won't end up regretting what you're buying.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
Article originally published by Dominic Beattie, May 2021.