Down Payment vs. Deposit in Toronto | Own In Toronto
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Buyers Guide

Down Payment
& Deposit

Two terms that every buyer hears, and many mix up. Here's exactly what each one means, how they relate to each other, and what Toronto sellers expect.

💡 Your deposit counts toward your down payment  ·  Approximately 5% is a common Toronto resale deposit  ·  Minimum requirements vary by purchase price
01
The Basics

What Is the Down Payment?

If you're buying your first home in Toronto, understanding the difference between a deposit and a down payment is one of the most important financial concepts in the buying process.

Your down payment is the total amount of cash you contribute toward the purchase price, the portion that isn't covered by your mortgage. The remaining balance, after crediting your deposit, must normally be delivered to your lawyer shortly before closing according to the lawyer's funding instructions. It is then applied to the purchase price when the transaction closes.

The larger your down payment, the smaller your mortgage and the less you pay in interest over time. With at least 20% down, borrower-paid mortgage default insurance (often called CMHC insurance) is generally not required, which can save thousands. Our Toronto mortgage calculators can estimate your minimum down payment and mortgage default insurance premium.

In plain terms: If you're buying an $800,000 home and putting 20% down, your total down payment is $160,000. If you already paid a $40,000 deposit, the remaining $120,000 must normally be delivered to your lawyer before closing.
02
At Offer

What Is the Deposit?

The deposit is paid at the time stated in the Agreement of Purchase and Sale, commonly within 24 hours after acceptance in Toronto resale transactions. Depending on the offer terms, the deposit may accompany the offer, be delivered upon acceptance or be paid by a later stated deadline. It's your show of good faith, demonstrating to the seller that you're serious and financially committed.

In much of the Toronto resale market, a deposit of approximately 5% of the purchase price has become the common expectation. The funds are typically held in the listing brokerage's real estate trust account and kept there until closing, at which point they are applied toward your total down payment. The agreement can name a different stakeholder, such as a lawyer, but the listing brokerage is the usual default.

Important: The deposit is credited toward the purchase price on closing and normally forms part of the cash you are contributing as your down payment. It is not an additional charge on top of the purchase price.
03
How They Work Together

Does the Deposit Count Toward the Down Payment?

Yes, the deposit counts as a portion of your down payment. You are not paying both a deposit and a full down payment separately. Here's how the math works in practice:

Example: $800,000 Purchase, 20% Down Payment
Total down payment required (20%) $160,000
Deposit paid at accepted offer (5%) −$40,000
Remaining down-payment balance required before closing $120,000

The $40,000 deposit sits in trust from offer acceptance through to closing. The balance of your down payment must be delivered to your lawyer before closing, according to the lawyer's funding instructions. On closing, those funds, together with your deposit and mortgage proceeds, are applied to the purchase price. You'll also need funds for closing costs such as land transfer tax, legal fees and adjustments, which are separate from your down payment.

04
Federal Rules

Minimum Down Payment Requirements

Canada's minimum down payment rules are set federally and are tiered based on purchase price. As of December 15, 2024, the price cap for an insured mortgage rose to $1.5 million. Here's what's required:

These are the standard federal minimums for an eligible owner-occupied purchase. Your lender may require more depending on your credit, income, property type and intended use. Non-owner-occupied investment properties generally require different financing.

Up to $500,000
5%
5% of the full purchase price. On a $500K home, that's $25,000 minimum.
$500K to $1.5M
5% + 10%
5% on the first $500K, plus 10% on the portion above $500K, up to $1,499,999.
$1,500,000 +
20%
Any property of $1.5M or more requires a minimum 20% down payment. Mortgage insurance is not available at this price point.
Example, $750,000 purchase: 5% on the first $500K = $25,000, plus 10% on the remaining $250K = $25,000. Minimum down payment = $50,000 (6.67% of purchase price).
05
Toronto Market

Can I Offer Less Than 5% as My Deposit?

Yes. There is no universal legal requirement for a 5% deposit, but offering less can weaken a buyer's position in many competitive Toronto resale transactions. A deposit of approximately 5% has become the common expectation in much of the Toronto resale market, and sellers have come to expect it as a baseline signal of a serious, financially prepared buyer.

Toronto Market Reality
Offering less than 5% can be perceived as a red flag. In a competitive offer situation, it may cause the seller to question your financial readiness, and weaken your offer substantially against competing buyers who are offering the full 5%.

In some circumstances, the parties may agree to a smaller deposit or a different payment schedule. However, in a competitive Toronto resale transaction, reducing the deposit can weaken the offer. If cash flow is tight, it is sometimes possible to negotiate a slightly longer deposit timeline, for example 48 to 72 hours rather than the standard 24, giving you a brief window to move funds. Your Realtor® should recommend an amount and deadline based on the particular property, seller instructions and offer environment.

Bottom line: Before making offers, keep the deposit amount recommended for your price range readily accessible. In Toronto resale transactions, that is often approximately 5%, but the agreement, not a universal rule, determines the amount and deadline. In a fast market, you may need to move within hours of acceptance.
06
Preparing Your Funds

Where Should Your Deposit Money Be Kept?

Keep your intended deposit in an account from which you can obtain a bank draft, certified cheque or wire quickly. Avoid relying on funds that require several business days to transfer, settle or withdraw. Ask your bank about transaction limits before you begin making offers.

Protect Against Wire Fraud
Do not transfer deposit funds based solely on emailed banking instructions. Independently verify wiring instructions with the brokerage or lawyer using a trusted phone number, because real estate transactions are targets for wire fraud.
07
FAQ

Frequently Asked Questions

What is the difference between a down payment and a deposit?
The down payment is the total cash you contribute toward the purchase price. The remaining balance, after crediting your deposit, is normally delivered to your lawyer shortly before closing and applied to the purchase price when the transaction closes. The deposit is paid according to the deadline in the Agreement of Purchase and Sale and normally forms part of that total cash contribution.
Does the deposit count toward the down payment?
Yes. The deposit is typically held in the listing brokerage's real estate trust account and credited toward the purchase price on closing. It normally forms part of your down payment, so the remaining down-payment balance is delivered to your lawyer before closing according to the lawyer's funding instructions.
What is the minimum down payment in Canada?
For an eligible owner-occupied purchase, the standard federal minimum is tiered by price: 5% on a purchase up to $500,000; 5% on the first $500,000 plus 10% on the portion between $500,000 and $1,499,999; and 20% on any home priced at $1,500,000 or more, where mortgage default insurance is not available. As of December 15, 2024, the insured price cap rose to $1.5 million. A lender may require more, and non-owner-occupied investment properties generally follow different financing requirements. You can estimate your own figure with our Toronto mortgage calculators.
How much deposit do Toronto sellers expect?
In much of the Toronto resale market, approximately 5% of the purchase price is the common deposit expectation. It signals to the seller that you are serious and financially prepared, and offering less can weaken your position in a competitive offer situation.
When is the down payment due?
The full down payment is applied on closing day, when you take possession. Your lawyer will normally require the remaining down-payment funds and closing costs shortly before the scheduled closing date, according to their funding instructions. The deposit you paid at offer acceptance already covers part of it. For the full purchase process, see our guide to buying in Toronto.
Is the deposit refundable if the deal falls through?
If a buyer breaches a firm agreement, the seller may claim entitlement to the deposit and may also seek additional damages. If entitlement is disputed, the stakeholder will generally continue holding the funds until the parties provide joint written direction or a court determines entitlement. If an agreement becomes null and void because a condition, such as financing or inspection, was not fulfilled or waived in accordance with its exact wording, the buyer will generally be entitled to the return of the deposit. However, the result depends on the agreement, the buyer's conduct and whether the parties dispute entitlement. Always confirm the specific terms in your agreement with your Realtor® and lawyer.
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