Earnest money and deposits
Typical structure, cancellation, financing failure, and return conditions.
Earnest money (手付金) is part of the price, not an extra cost, and is commonly around 5–10% but not universal; whether it is returned if financing fails depends on the contract’s financing-condition clause and whether its requirements were met.
Key points
- Earnest money is credited to the price at closing — not an extra cost if the deal completes.
- A common range is 5–10%, but there is no universal mandatory percentage.
- Understand cancellation rights, deadlines, and liquidated damages.
- The deposit is returned on financing failure only if the financing-condition clause applied and its requirements were met.
What earnest money is
Earnest money (手付金) is a payment made at contract that is part of the purchase price, not an additional cost — it is credited to the price at closing if the deal completes. Common market practice is roughly 5–10%, but there is no universal mandatory percentage, and the amount is negotiated. Understand the cancellation rights it carries: in many contracts, up to a defined point, a buyer can cancel by forfeiting the deposit and a seller by returning double it, but deadlines and liquidated-damages terms vary.
Return on financing failure
A key question for a mortgage buyer is whether the deposit is returned if the loan falls through. The answer is: only if the contract’s financing-condition clause (住宅ローン特約) applies and its requirements were met — the named lender, amount, and deadlines, and your having applied and pursued the loan in good faith. This is why the financing-condition clause must be carefully drafted and why you should not sign before you understand it. If the clause does not apply or you missed its conditions, the deposit can be at risk.
Key points to carry away: Earnest money is credited to the price at closing — not an extra cost if the deal completes; A common range is 5–10%, but there is no universal mandatory percentage; Understand cancellation rights, deadlines, and liquidated damages; The deposit is returned on financing failure only if the financing-condition clause applied and its requirements were met. Use the linked guides and calculators for the full decision, and confirm anything material with the lender, a licensed broker, a judicial scrivener, or a tax accountant before you act.
Who this is for
- Mortgage buyers protecting their deposit
- Anyone negotiating the deposit
What this is not
- A legal opinion on a specific dispute
- The deposit is not automatically returned if a loan fails; it depends on the financing-condition clause being met.
Frequently asked questions
How large is earnest money?
Negotiated; 5–10% is common market practice but not universal.
Is earnest money an extra cost?
No; it is normally credited to the price at closing.
Is the deposit always returned if the loan fails?
Only if the contract’s financing-condition clause applies and its requirements were met.