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The term house deposit can be used to describe one of several types of deposits that a buyer or renter makes in order to secure housing for herself. If a person is buying a house, a house deposit usually signifies a down payment or a percentage of the home's price that is paid up front and not included in the mortgage. If someone is renting a house, a house deposit may refer to a security deposit, also known as a damage deposit or rental deposit, that is charged by the landlord before the tenant moves in.
Many mortgage lenders require a house deposit or down payment before issuing a mortgage. Some mortgage programs, however, either do not require a down payment or require a very small down payment. For example, in the United States, the federal housing administration (FHA) routinely guarantees mortgages in which the buyer pays as little as 3.5 percent of the home's sale price as a down payment. In some cases, it is possible for former service members to get a no-down payment Veterans Affairs (VA) mortgage as well. The purpose of a house deposit in these instances is to offer some protection to the mortgage lender so that the house has some equity to compensate the mortgage lender in case of foreclosure.
A house deposit that is paid when renting a house provides the landlord with some financial protection against a tenant skipping out on the rent or damaging the rental unit and not paying for repairs. A rental security deposit is often equal to one month's rent, though some landlords charge more than this. In the United States and many other countries, landlord-tenant law strictly governs the use and management of security deposits. For example, some laws limit the amount a landlord can charge for a security deposit. Laws also may require a landlord to keep a security deposit in a separate account and pay interest on the security deposit to tenants either on an annual basis or when the tenancy is terminated.
Home buyers can sometimes receive grants to assist them in paying a house deposit. The mortgage lender may also have rules that permit the home buyer to borrow the house deposit from another source. Landlords are often hesitant to rent a home to a tenant without some kind of security deposit, particularly in places where tenants have significant protection against eviction. It is, however, illegal in the United States and other countries for a landlord to demand security deposits in a discriminatory manner, such as requiring parents of small children to pay an extra deposit. A landlord may be able to require a larger security deposit from tenants who have bad credit histories or who have pets that may cause damage to the unit above what a normal security deposit could cover.