A deposit secures your offer; a down payment funds your purchase. Learn how the two work together when buying a resale or pre-construction home in Canada.
Written by Faiza Ahmed
Last updated on August 14, 2026
A deposit and a down payment are both part of buying a home, but they serve different purposes and are usually paid at different stages.
The deposit is the money a buyer agrees to provide under the purchase agreement. The contract may be called an Agreement of Purchase and Sale in Ontario, a Contract of Purchase and Sale in British Columbia, a Promise to Purchase in Quebec, or another name depending on the jurisdiction. It helps secure the transaction and demonstrates the buyer’s commitment to completing the purchase.
The down payment is the total portion of the purchase price that the buyer pays without using the mortgage on that purchase. When mortgage financing is involved, the source of those funds must meet the lender’s and, where applicable, mortgage insurer’s requirements.
Key point: The deposit is not an extra payment on top of the down payment. If the transaction closes, the deposit is credited toward the purchase price and normally becomes part of the buyer’s total down payment.
A deposit is money the buyer agrees to provide as part of an accepted purchase agreement.
The deposit helps provide security to the seller by showing that the buyer is financially prepared and committed to the transaction. It also gives the seller a source of funds that may become relevant if the buyer fails to complete a binding purchase.
The deposit is not what makes an offer legally binding. An accepted Agreement of Purchase and Sale may be binding even if the deposit has not yet been delivered. However, failing to deliver the deposit by the contractual deadline may place the buyer in breach of the agreement.
The exact legal consequences depend on the terms of the signed agreement. Buyers should never assume that failing to deliver the deposit automatically cancels the transaction.
There is no single deposit percentage required for every Canadian home purchase.
The deposit amount is negotiated between the buyer and seller and written into the purchase agreement. It may be influenced by:
An Ontario buyer may negotiate a deposit equal to 5% of the purchase price. This is an illustration, not a legislated minimum or a verified market standard.
A buyer may offer a smaller or larger deposit. A larger deposit may make an offer appear stronger, but it can also increase the amount of money at risk if a dispute develops.
Buyers should not offer a deposit they cannot deliver by the deadline stated in the agreement.
The purchase agreement determines when the deposit must be delivered.
Depending on the wording of the offer, the deposit may be:
The commonly used 24-hour deadline is not a universal legal rule. It applies only when that deadline is included in the accepted agreement.
Buyers should also confirm which payment methods are acceptable. Depending on the brokerage, lawyer or builder, accepted methods may include a bank draft, certified cheque, wire transfer or electronic deposit service.
The buyer should arrange access to the deposit before submitting the offer. Moving money from an investment account, receiving money from outside Canada or waiting for a gift transfer can create delays.
The purchase agreement should identify who will hold the deposit.
In an Ontario resale transaction involving registered real estate brokerages, the deposit is commonly held in the seller’s brokerage trust account. However, the agreement may name a lawyer or another permitted party as the deposit holder.
Ontario brokerages that receive money in trust must handle and disburse those funds according to the terms under which the money is held and applicable trust-account requirements.
The deposit is not normally paid directly to the seller unless the agreement specifically provides for that arrangement. Buyers should obtain legal advice before agreeing to an unusual deposit arrangement.
Deposit practices and trust rules differ across Canada, so buyers outside Ontario should obtain province-specific advice.
The down payment is the total amount of the purchase price that the buyer pays without using mortgage financing.
For example, if a home costs $800,000 and the buyer makes a $100,000 down payment, the buyer would generally need a $700,000 mortgage before accounting for any mortgage loan insurance premium.
The down payment may be paid in two stages:
The deposit is therefore usually the first portion of the down payment, not a separate home-buying expense.
The federal minimum down payment depends on the home’s purchase price.
The insured-mortgage price cap increased from $1 million to $1.5 million on December 15, 2024. Homes priced at $1.5 million or more are not eligible for mortgage loan insurance and therefore generally require at least 20% down.
These are minimum requirements, not guarantees that a lender will approve the mortgage. A lender may require a larger down payment because of:
A buyer must qualify for the mortgage even when the buyer has the minimum required down payment.
When the purchase closes, the deposit is credited toward the purchase price.
The buyer does not pay the full down payment again. Instead, the buyer generally provides the remaining amount needed after the deposit has been deducted.
The basic calculation is:
Closing costs are then added separately.
A resale home is a property being purchased from an existing owner rather than directly from a builder. The deposit and down payment process generally follows these stages.
Before submitting an offer, the buyer should determine:
A mortgage pre-approval can help establish a budget, but it does not guarantee final mortgage approval, as the Financial Consumer Agency of Canada explains.
The offer should state:
The buyer should understand every deadline before signing.
Once the offer is accepted as the purchase agreement requires, a binding contract is formed.
The buyer must then deliver the deposit according to the agreement. The buyer should not wait until the deadline to begin transferring or obtaining the money.
An accepted agreement can be binding even when it contains conditions. Conditions give the parties specific contractual rights, but they do not mean the buyer can simply change their mind without following the agreement.
The buyer submits the accepted agreement and required financial documents to the lender or mortgage broker.
Even when a buyer has been pre-approved, final mortgage approval is still required. CMHC advises that a buyer with a pre-approved mortgage must still obtain final approval during the conditional offer period.
The lender may review:
A financing condition should not be waived merely because the buyer has a pre-approval.
Before closing, the buyer’s lawyer or notary calculates the amount needed to complete the purchase.
This amount may include:
The deposit already being held is credited toward the purchase price.
Suppose a buyer purchases a resale home for $800,000 and provides a $40,000 deposit after acceptance, planning to make the minimum down payment.
The buyer would need to provide the additional $15,000 toward the down payment before closing, plus separate funds for closing costs.
Because the down payment is less than 20%, mortgage loan insurance would generally be required.
Mortgage loan insurance, also called mortgage default insurance, protects the lender if the borrower defaults. It does not protect the buyer from missed payments or foreclosure.
For a high-ratio mortgage with a down payment below 20%, mortgage default insurance is generally required.
The premium is based largely on the mortgage’s loan-to-value ratio. A smaller down payment results in a higher loan-to-value ratio and usually a higher premium.
The following are standard CMHC premium rates for common owner-occupied purchases:
These rates do not include every mortgage product, surcharge or non-traditional down payment arrangement. The lender and mortgage insurer determine the final premium.
The premium can normally be added to the mortgage, but the borrower will then pay mortgage interest on it.
Ontario, Quebec and Saskatchewan apply provincial sales tax to CMHC mortgage loan insurance premiums. That provincial tax cannot be added to the mortgage and must be paid separately.
A larger down payment can:
However, buyers should not use every available dollar for the down payment and leave themselves without money for closing costs, repairs or emergencies.
The right down payment depends on the buyer’s complete financial position, not only the goal of avoiding mortgage insurance.
Traditional down payment sources may include:
CMHC identifies savings, proceeds from a property sale and non-repayable gifts from relatives as traditional down payment sources.
An eligible first-time buyer can use a First Home Savings Account to save toward a qualifying home.
The annual FHSA participation room begins at $8,000 in the year the account is opened, subject to carry-forward rules, and the lifetime contribution limit is $40,000. Qualifying withdrawals may be made tax-free.
The Home Buyers’ Plan allows an eligible participant to withdraw up to $60,000 from their RRSP toward a qualifying home purchase.
The withdrawal must satisfy the program’s requirements and generally must be repaid to the RRSP over time. An eligible buyer may use the Home Buyers’ Plan and make a qualifying FHSA withdrawal for the same home.
A lender may accept a non-repayable financial gift from a qualifying relative. The lender may require:
A loan disguised as a gift can affect the mortgage application and the buyer’s debt calculations. Buyers should disclose the true source of all funds.
The answer depends on the purchase agreement, the reason the transaction did not close and whether the buyer had a contractual right to terminate.
An offer may contain conditions relating to:
If a condition is not satisfied and the buyer properly terminates the agreement according to its wording and deadline, the buyer may be entitled to the return of the deposit.
However, the buyer must follow the agreement precisely. A condition does not necessarily give the buyer an unrestricted right to cancel for any reason.
Cooling-off and rescission rights depend on the jurisdiction and property. An ordinary Ontario resale purchase generally does not include an automatic cooling-off period. In British Columbia, the Home Buyer Rescission Period Regulation gives buyers three business days to rescind many residential purchase contracts, generally with a payment equal to 0.25% of the purchase price and subject to statutory exemptions.
Outside an applicable statutory right or contract condition, once the agreement becomes firm, the buyer cannot normally cancel simply because:
Warning: A buyer who fails to close without a valid contractual right may lose the deposit and face further legal consequences.
A brokerage holding a disputed deposit cannot decide whether the buyer or seller should receive it.
In Ontario, the brokerage can generally release a disputed deposit only according to:
RECO’s consumer deposit insurance does not decide contractual disputes between buyers and sellers.
A buyer or seller involved in a deposit dispute should speak with a real estate lawyer immediately.
Pre-construction deposits work differently from deposits on resale homes.
Instead of making one deposit shortly after acceptance, a buyer may be required to make several payments according to a builder’s deposit schedule. A schedule might require payments:
There is no single deposit schedule for every builder or project. Buyers must review the agreement carefully.
The total pre-construction deposit may be much larger than the deposit normally provided for a resale property. Nevertheless, the deposit is still credited toward the purchase price if the transaction closes.
Paying a large pre-construction deposit does not guarantee that the buyer will qualify for a mortgage when the home is completed.
A buyer’s income, debts, credit, interest rates and lender requirements may be different several years later. A mortgage pre-approval obtained when the agreement is signed is not necessarily valid at final closing.
Buyers should consider the risk of future mortgage qualification before committing to a long-term pre-construction purchase.
Ontario buyers purchasing a new or pre-construction condo directly from a developer generally have a 10-calendar-day cooling-off period.
The period begins after the buyer has received the required documents, including the executed purchase agreement, disclosure statement and Condo Buyers’ Guide. During the cooling-off period, the buyer may cancel the agreement by providing proper written notice.
This cooling-off period generally does not apply to the ordinary purchase of a resale condo from an existing owner.
A real estate lawyer should review a pre-construction agreement during the cooling-off period. Builder agreements can contain:
British Columbia’s Real Estate Development Marketing Act gives a purchaser of a qualifying development unit seven days to rescind after the later of entering the purchase agreement and acknowledging an opportunity to read the required disclosure statement. A valid rescission requires written notice, and the deposit must be returned promptly.
In Quebec, a natural person buying a new or planned residence from a builder or developer to occupy it generally uses a preliminary contract. OACIQ explains that the buyer has ten days to withdraw, although the contract may allow the seller to claim an indemnity of up to 0.5% of the agreed price.
Ontario provides certain statutory protections for deposits on qualifying new homes and condominiums. The coverage and trust protections depend on factors such as the property type, purchase price, agreement date and how the deposit is held.
Tarion coverage is subject to limits and should not be assumed to protect every dollar paid to a builder. Buyers should verify current coverage and have their lawyer review where each payment will be held.
For an Ontario freehold purchase agreement signed on or after January 1, 2026, the purchaser should notify Tarion within 45 days to qualify for the maximum deposit coverage currently available. Late or missing notification may reduce the coverage limit. This notification step does not apply to condominium or contract-home purchasers.
The deposit is credited toward the purchase price. It should not be described as automatically paying the buyer’s closing costs.
Closing costs are additional amounts that may include:
The Financial Consumer Agency of Canada recommends preparing for upfront and closing costs of approximately 1.5% to 4% of the purchase price. The actual amount depends on the province, municipality and transaction.
For an $800,000 home, 1.5% to 4% would equal approximately $12,000 to $32,000. This is a general planning range, not an estimate of the exact closing statement.
The easiest way to understand the difference is:
For resale homes, the deposit amount, deadline and deposit holder are determined by the purchase agreement.
For mortgage financing, the total down payment must meet federal minimums, lender requirements and mortgage insurer requirements.
For pre-construction homes, buyers must also understand the builder’s deposit schedule, long-term mortgage qualification risks, closing adjustments and available deposit protections.
Every transaction is different. Buyers should review the purchase agreement with their real estate agent and obtain advice from a real estate lawyer, mortgage professional and tax professional where appropriate.
About the author:
Faiza Ahmed
As the founder of PropertyMesh, Faiza Ahmed is dedicated to making real estate more transparent and cost-effective. While she advocates for more transparent, flexible fee structures so sellers can keep more of their equity, her core focus is empowering buyers and sellers to make informed decisions. Faiza is a licensed real estate broker registered with the Real Estate Council of Ontario (RECO Registration #4791581) and an active member of the Toronto Regional Real Estate Board (TRREB).
| Feature | Deposit | Down Payment |
|---|---|---|
| Main purpose | Secures the buyer’s commitment under the purchase agreement | Reduces the amount the buyer must borrow |
| When it is paid | According to the deadline in the purchase agreement | Part is paid through the deposit, with the balance normally provided before closing |
| How the amount is determined | Negotiated between the buyer and seller | Based on the purchase price, mortgage rules and lender requirements |
| Where the money goes | To the deposit holder named in the agreement, often a brokerage trust account in Ontario | Toward the purchase price through the closing process |
| Is it an additional cost? | No | No |
| Is it refundable? | It depends on the agreement and why the transaction did not close | Not applicable once it has been used to complete the purchase |
| Does it include closing costs? | No | No |
| Purchase price | General minimum down payment |
|---|---|
| $500,000 or less | 5% of the purchase price |
| More than $500,000 but less than $1.5 million | 5% of the first $500,000, plus 10% of the portion above $500,000 |
| $1.5 million or more | 20% of the purchase price |
| Step | Amount |
|---|---|
| Purchase price | $800,000 |
| Minimum down payment — 5% of the first $500,000 | $25,000 |
| Minimum down payment — 10% of the remaining $300,000 | $30,000 |
| Minimum total down payment | $55,000 |
| Deposit paid after acceptance | $40,000 |
| Remaining down payment required before closing | $15,000 |
| Mortgage before insurance premium ($800,000 − $55,000) | $745,000 |
| Down payment | Approximate loan-to-value ratio | Standard CMHC premium |
|---|---|---|
| 5% to 9.99% | More than 90% to 95% | 4.00% of the mortgage |
| 10% to 14.99% | More than 85% to 90% | 3.10% |
| 15% to 19.99% | More than 80% to 85% | 2.80% |
| 20% or more | 80% or less | Normally no high-ratio insurance required |
The deposit is normally included in the down payment. It is not added on top of it.
The buyer still needs money for closing costs, adjustments, moving and emergencies.
Refundability depends on the agreement and circumstances. A deposit dispute may continue even when one party believes the deal was properly terminated.
The deadline comes from the accepted agreement. It may be 24 hours, but it could be different.
A pre-approval does not guarantee final mortgage approval. The lender must still approve the borrower, property and completed application.
Buyers should know how quickly they can access money held in investments, registered accounts, foreign accounts or another property.
The buyer should confirm final financing with the lender and obtain appropriate professional advice before waiving a financing condition.
There is no universal 35% down payment rule for every newcomer to Canada.
CMHC states that newcomers with permanent resident status have access to its homeowner mortgage loan insurance products, with minimum down payments starting at 5%, subject to eligibility. Temporary residents and non-residents may face different lender, insurer and documentation requirements.
