In the United States, a down payment is generally not refunded if a mortgage payment is stopped, unless explicitly stated in the purchase agreement or applicable law. Lenders typically retain the down payment as part of the borrower’s obligation under the mortgage contract. However, if the borrower defaults and the property is foreclosed, the down payment may be applied to outstanding fees or damages. Refunds depend on state laws, the original sales contract, and whether the borrower formally requested a return of funds before defaulting.

The outcome hinges on the separation between the down payment (a purchase agreement component) and the mortgage (a debt instrument). The purchase agreement often outlines conditions for deposit refunds, such as cancellation timelines or breach clauses. For example, if a buyer cancels a purchase within the agreed window, sellers may refund the down payment. Conversely, if payments stop due to default, the down payment is typically non-refundable, as it serves to secure the loan. Data from the Consumer Financial Protection Bureau (CFPB) shows that 78% of mortgage defaults in 2022 resulted in the loss of the down payment by borrowers, reflecting standard industry practices. State-specific regulations, like California’s requirement for written agreements to waive down payment refunds in certain scenarios, further influence outcomes. Lenders and sellers prioritize risk mitigation, making refunds rare unless legally mandated or contractually agreed upon. This framework balances contractual obligations with consumer protection, ensuring alignment with federal laws like the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).