There is no such thing as a down deposit.

I’ve seen this erroneous phrase used more than a few times and I feel strongly enough about it to write a few lines for anyone who wants/needs the clarification. Most often, I’ve seen this phrase used in the context of large purchases, especially property. Best I can tell, this is a combination of two other money-related things: down payments and deposits.

I’ll allow that it can be a bit confusing since you might deposit (the verb) the money for a down payment somewhere. But the two concepts contained within the phrase aren’t even all that related to each other.

What’s a deposit?

Let’s start with deposits since they’re more broadly applicable. A deposit (the noun) in the context of a purchase is money you commit to show that you’re serious about following through on a purchase or deal. It is putting your money where your mouth is and this money may or may not be refundable if you choose not to follow through with the purchase or deal. In the case of a real estate purchase, the buyer provides a deposit to the seller once the seller has accepted the buyer’s offer to make it more difficult (or, at any rate, more expensive) for the buyer to back out of the deal. The deposit is not extra money that the buyer is paying to the seller, it is just money that the buyer is committing/providing in advance.

What’s a down payment?

Say you want to purchase a house. Houses are expensive and you don’t have enough money on hand to pay for one entirely, but you do have some money. A down payment is the initial amount that you pay towards a large purchase after which you need to borrow money to cover the rest of the cost (for a house, that’d be in the form of a mortgage, likely). For example, you make an offer (which gets accepted) on a house that costs $500k but you have $200k saved. Instead of getting a loan for the entire cost of the house ($500k), you can use your savings as a down payment, spending the $200k that you have saved up and then only needing to borrow the remainder ($300k).

Since deposits are usually a much smaller amount than down payments, the deposit often just ends up being part of the down payment. For example, you have $200k saved and you make an offer (which gets accepted) on a house that costs $500k. As part of showing the seller that you’re serious about your offer, you put up a $10k deposit once your offer has been accepted, reducing your savings to $190k. When the deal closes, you make a down payment of $200k ($10k from the deposit and $190k from savings) so that you only need to borrow $300k.

I hope it’s now clear when you should be using which term. While the two often show up in close proximity to others, down payments and deposits are very different things that just both involve money!