Understanding deposit vs down payment Ontario real estate rules is essential for homebuyers. Many Ontario homebuyers — especially first-timers — use the terms “deposit” and “down payment” interchangeably. But they are not the same thing, and confusing them can lead to serious financial missteps during a real estate transaction. Understanding the difference between a deposit and a down payment in Ontario, and knowing how much you need for each, is essential before you make an offer on a home.

What Is a Deposit in Ontario Real Estate?

A deposit is a sum of money you put forward when you make an offer to purchase a home. It demonstrates to the seller that you are a serious buyer and that you have the financial means to follow through on the transaction. In Ontario, the deposit is paid to the listing brokerage — not directly to the seller — and is held in trust until the deal closes.

The deposit is ultimately applied toward the purchase price at closing. It becomes part of your down payment, but it is not the same as the down payment itself.

When Is the Deposit Due?

In Ontario, the deposit is typically due within 24 hours of the offer being accepted, unless otherwise specified in the Agreement of Purchase and Sale. In competitive markets, some sellers request that the deposit be certified (in the form of a bank draft or certified cheque) to ensure its validity. In pre-construction purchases, the deposit structure is different and is paid in installments over the construction period.

How Much Deposit Is Required in Ontario?

There is no legally mandated deposit amount in Ontario. However, the convention is typically 5% of the purchase price. In competitive or hot market conditions, some buyers offer 5-10% deposits to make their offers more attractive to sellers. In pre-construction, builders typically require staged deposits totaling 15-20% of the purchase price paid over the construction period.

For example, on a $700,000 home purchase in Ontario, a typical deposit would be $35,000 (5%). This money is due quickly — usually within 24 hours of acceptance — so you need to have these funds readily accessible, not tied up in investments or locked in an account.

What Is a Down Payment in Ontario?

The down payment is the total amount of your own money that goes toward the purchase price of the home — as opposed to the mortgage, which is the portion you borrow from a lender. The down payment is paid at closing (the date of completion), and the deposit you paid earlier is credited as part of the down payment.

In simple terms: Down Payment = Deposit + Additional Funds Paid at Closing

Minimum Down Payment Requirements in Canada

Canada has regulated minimum down payment requirements based on the purchase price of the home:

• Homes priced under $500,000: Minimum 5% down payment
• Homes priced $500,000 to $999,999: 5% on the first $500,000 + 10% on the remaining amount
• Homes priced $1,000,000 or more: Minimum 20% down payment (no mortgage insurance available)

For example, on a $700,000 home in Ontario, the minimum down payment would be: 5% on the first $500,000 ($25,000) + 10% on the remaining $200,000 ($20,000) = $45,000 total minimum down payment.

Down Payments and CMHC Mortgage Insurance

If your down payment is less than 20% of the purchase price, your mortgage must be insured through Canada Mortgage and Housing Corporation (CMHC), Sagen (formerly Genworth), or Canada Guaranty. This insurance protects the lender — not the borrower — in case of default. The CMHC premium ranges from 2.8% to 4% of the mortgage amount and is typically added to your mortgage.

A down payment of 20% or more avoids this insurance premium, which is why 20% is often referred to as the threshold for a “conventional” (uninsured) mortgage.

Deposit vs Down Payment Ontario: Key Differences Explained

• Timing: The deposit is paid immediately after offer acceptance; the down payment balance is paid at closing
• Purpose: The deposit shows commitment; the down payment is your equity contribution to the purchase
• Recipient: The deposit is held in trust by the brokerage; the down payment goes to the seller/builder at closing
• Risk: In a firm (no conditions) deal, the deposit is generally at risk if you fail to close; the down payment is at risk once it’s part of the completed transaction

What Happens to the Deposit if the Deal Falls Through?

If the deal falls through due to a condition not being met (e.g., a financing condition), the deposit is typically returned to the buyer. However, if the buyer fails to close a firm deal (no conditions), the seller may be entitled to keep the deposit as compensation for their losses. This is one of the most important reasons to ensure you have proper financing in place before waiving conditions.

How Much Do You Need to Have Ready When Buying a Home in Ontario?

In addition to your deposit and down payment, plan for these closing costs when buying a home in Ontario:

• Land Transfer Tax: Both provincial and (in Toronto) municipal land transfer tax apply
• Legal fees: Typically $1,500 to $2,500 for a residential purchase
• Home inspection: $400 to $600
• Title insurance: Typically a few hundred dollars
• Moving costs: Variable

First-time homebuyers in Ontario may qualify for a rebate on a portion of the land transfer tax, which can provide meaningful savings at closing.

Final Thoughts

Understanding the difference between a deposit and a down payment in Ontario — and how much you need of each — is foundational knowledge for any homebuyer. Getting this right from the beginning helps you budget accurately, avoid surprises at closing, and approach offers with confidence.

If you’re buying a home in the GTA or Durham Region and want expert guidance from offer to closing, Team Rajpal is here every step of the way. Contact us today to start your homebuying journey.

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