What is the difference between a deposit and a down payment in Canada?

The deposit is a sum of money you pay when your offer is accepted (or within a few days) to show good faith and commitment to the deal. It is held in trust by the listing brokerage or the seller''s lawyer. The down payment is the total amount you contribute toward the purchase price minus the mortgage — it is the difference between what you pay and what you borrow. The deposit is part of the down payment, not a separate cost. If your down payment is $50,000 and your deposit is $20,000, you owe $30,000 more at closing.

How much is the deposit when buying a home in Canada?

There is no legal minimum for a deposit in Canada, but the standard is 3%–5% of the purchase price. In competitive markets like Toronto and Vancouver, deposits of 5%–10% are common. A larger deposit signals a stronger buyer, which can be a competitive advantage in multiple-offer situations. Some sellers reject low-deposit offers because they suggest less commitment or financial capacity.

Is the deposit refundable if the deal falls through?

It depends on why the deal fell through. If a condition in the offer (financing, inspection, or status certificate) is not met and you properly waive the offer within the condition period, your deposit is fully refundable. If you walk away after removing conditions or on a firm (no-condition) offer, you forfeit the deposit and the seller may also sue for damages. The deposit is held in trust — it is not released until both parties agree or a court orders it.

Do you lose your deposit if you can not get a mortgage?

If your offer included a financing condition and you cannot get approved, you can walk away and get your full deposit back. If you waived the financing condition (or made a firm offer with no conditions), you risk losing the deposit and the seller could sue you for the difference if they sell the property for less. Never waive a financing condition unless you have unconditional mortgage approval.

When do you pay the deposit vs the down payment?

The deposit is paid within 24 hours to a few days of your offer being accepted — typically by certified cheque or bank draft to the listing brokerage''s trust account. The remaining down payment (minus the deposit) is paid through your lawyer on closing day. For example: $600,000 home, 10% down payment ($60,000), deposit of $25,000 paid at offer acceptance, remaining $35,000 paid at closing.

Deposit vs Down Payment in Canada: The Critical Difference Explained (2026)

Most first-time home buyers in Canada use “deposit” and “down payment” interchangeably. They are not the same thing, and confusing them can lead to serious problems — from surprise cash requirements at closing to forfeited deposits worth tens of thousands of dollars. The deposit is the earnest money you put up when making an offer to buy. The down payment is your total equity contribution to the purchase. The deposit is part of your down payment, not extra on top of it.

Deposit vs Down Payment: Side by Side

Feature	Deposit	Down Payment
When paid	At offer acceptance (24 hrs–few days)	At closing
How much	3%–10% of purchase price (no legal minimum)	5%–20%+ of purchase price (minimum enforced by law)
Paid to	Listing brokerage trust account or seller’s lawyer	Your own lawyer/notary, who transfers to seller
Purpose	Shows good faith and commitment	Reduces mortgage amount
Refundable?	Yes — if conditions are not met	N/A — it’s applied to the purchase
Held where	In trust (brokerage or lawyer)	In your bank account until closing
Relationship	Part of the down payment	Total equity contribution (includes deposit)

How They Fit Together

The Math

Component	Amount
Purchase price	$650,000
Down payment (10%)	$65,000
Deposit (paid at offer)	$25,000
Balance of down payment (paid at closing)	$40,000
Mortgage	$585,000

The deposit ($25,000) is credited toward your total down payment ($65,000) on closing day. You only need to come up with the remaining $40,000 at closing — not $65,000 on top of the deposit.

Timeline

Event	Payment	Running Total
Offer accepted (Day 1–3)	Deposit: $25,000	$25,000 committed
Condition period (Day 1–10)	Nothing	$25,000 in trust
Conditions waived (Day 10)	Nothing	Deal is firm
Closing day (Day 30–90)	Balance of down payment: $40,000	$65,000 total (your equity)
Closing day	Mortgage funds: $585,000	Deal closes

The Deposit: What You Need to Know

How Much to Offer

Market Conditions	Typical Deposit	Rationale
Buyer’s market	1%–3% ($6,500–$19,500 on $650K)	Sellers accept smaller deposits
Balanced market	3%–5% ($19,500–$32,500 on $650K)	Standard expectation
Hot seller’s market	5%–10% ($32,500–$65,000 on $650K)	Larger deposit = stronger offer
Multiple offers	5%–10%+	Signals commitment; may make offer more competitive

A deposit of less than 5% in a competitive market may cause sellers to view your offer as less serious — even if your price is the same as a competing offer with a larger deposit.

When and How to Pay

Detail	Standard Practice
Deadline	Within 24 hours of acceptance (negotiable — some offers say 2–5 business days)
Form of payment	Certified cheque or bank draft (personal cheques are rarely accepted)
Made payable to	Listing brokerage “in trust” (most common) or seller’s lawyer
Where it is held	Brokerage trust account or lawyer’s trust account
Earning interest?	Usually no (some jurisdictions require interest to be held for buyer)

What Happens to the Deposit

Scenario	Deposit Outcome
Deal closes successfully	Applied to down payment; buyer receives credit on closing
Condition not satisfied (buyer waives offer)	Fully refunded to buyer
Buyer walks away after conditions removed	Forfeited — seller keeps deposit
Seller cannot close (title issue, etc.)	Fully refunded to buyer
Mutual agreement to terminate	Refunded (both parties must sign mutual release)
Dispute over who gets it	Deposit stays in trust until parties agree or court orders release

The Deposit and Conditions

This is the most important aspect to understand:

Offer Type	Deposit Protected?	Risk Level
Conditional offer (financing, inspection)	Yes — during condition period	Low
Offer with conditions waived	No	High
Firm offer (no conditions)	No	Highest
Pre-construction purchase	Partial — varies by agreement and provincial law	Medium to high

If you make a firm offer and then cannot close, you lose the deposit AND the seller may sue you for additional damages (e.g., the difference between your agreed price and what they eventually sell for).

Pre-Construction Deposits

Pre-construction condos and new builds have different deposit structures:

Stage	Typical Deposit	When Due
Initial deposit	$5,000–$10,000	At signing (within 10 days cooling-off in Ontario)
Second deposit	5% of purchase price	30 days
Third deposit	5%	90–180 days
Fourth deposit	5%	On interim occupancy or further milestone
Total deposits	15–20%	Over 12–24+ months

Pre-construction deposits are governed by provincial law. In Ontario, the Tarion warranty program protects deposits up to $60,000 on freehold homes and $20,000 on condos if the builder goes bankrupt.

The Down Payment: What You Need to Know

Minimum Down Payment Rules (Federal)

Purchase Price	Minimum Down Payment
Up to $500,000	5%
$500,001–$1,499,999	5% on first $500K + 10% on remainder
$1,500,000+	20%

Down Payment Examples

Purchase Price	Minimum Down Payment	Percentage
$400,000	$20,000	5.0%
$600,000	$35,000	5.8%
$800,000	$55,000	6.9%
$1,000,000	$75,000	7.5%
$1,500,000	$300,000	20.0%

Where the Down Payment Can Come From

Source	Eligible?	Documentation Required
Savings	Yes	3 months bank statements
RRSP (Home Buyers’ Plan)	Yes	HBP withdrawal form; up to $60,000 per person
FHSA	Yes	First-time buyers; tax-free withdrawal
Gift from immediate family	Yes	Signed gift letter; no repayment required
Sale of existing property	Yes	Sale agreement and completion documentation
Borrowed funds	Yes, with conditions	Must be declared; included in debt ratio calculations
Investment account	Yes	3 months statements
Inheritance	Yes	Letter from estate lawyer or executor

What the Down Payment Covers

Element	Covered by Down Payment
Purchase equity	Yes — reduces mortgage amount
Closing costs	No — separate funds required
CMHC insurance	No — added to mortgage
Land transfer tax	No — paid separately at closing
Legal fees	No — paid separately
Moving costs	No — paid separately

Important: Your down payment and your closing costs are separate. A buyer with 5% down payment should budget an additional 1.5%–4% of the purchase price for closing costs. See closing costs guide.

The Risks of Confusing Deposit and Down Payment

Scenario 1: Not Enough Cash at Closing

Misunderstanding	Consequence
Buyer thinks deposit IS the down payment	Short on cash at closing
Example: $600K purchase, $30K deposit, 5% down ($35K total)	Buyer needs $5K more at closing + closing costs

Scenario 2: Oversized Deposit

Misunderstanding	Consequence
Buyer puts entire down payment as deposit	If deal fails after conditions removed, entire down payment at risk
Example: $60K deposit on a $600K purchase	Could lose $60K if they cannot close

Best practice: Keep your deposit as small as the market allows. The rest of your down payment stays safely in your bank account until closing day, when it is transferred through your lawyer.

Scenario 3: Deposit Bigger Than Down Payment

This happens in hot markets where sellers expect large deposits, but the buyer’s down payment is only 5%.

Factor	Amount
Purchase price	$600,000
Down payment (5%)	$30,000
Seller requests 5% deposit	$30,000
Problem	Entire down payment is tied up in deposit; no cash for closing costs

In this case, the buyer needs additional funds beyond the minimum down payment to cover closing costs (typically $7,000–$15,000).

Key Rules to Remember

Rule	Why It Matters
The deposit is part of the down payment	They are not additive
Keep the deposit as small as market allows	Minimize risk if deal falls through
Never waive financing condition if you are not approved	Deposit is at risk
Budget closing costs separately from down payment	Down payment ≠ total cash needed
Get your deposit money liquid early	You need a certified cheque or bank draft within 24 hours
Pre-construction deposits are different	Multiple stages, higher total, different protections