A deposit and a down payment serve different purposes in an Ontario real estate transaction. The deposit is a good-faith payment submitted with your offer to show the seller you are serious, while the down payment is the total amount of your own money applied toward the purchase price to secure mortgage financing on closing day.
The deposit comes first. When you submit an offer through the standard OREA Agreement of Purchase and Sale, you specify a deposit amount. If the seller accepts, you are typically required to deliver that deposit within 24 hours of acceptance. There is no legally mandated minimum deposit in Ontario, but in competitive Toronto markets deposits commonly range from 5% to 10% of the purchase price. A larger deposit signals financial readiness and can strengthen your offer, particularly when competing against other buyers.
Your deposit is held in trust by the listing brokerage until closing. Under Ontario's Trust in Real Estate Services Act (TRESA), brokerages are required to maintain regulated trust accounts for these funds. The Real Estate Council of Ontario (RECO) administers a mandatory consumer deposit insurance program that provides protection in cases of brokerage fraud, insolvency, or misappropriation. This insurance is automatic when you work with a registered agent and comes at no cost to buyers.
The down payment, by contrast, is determined by federal lending rules and is due on closing day. For properties priced at $500,000 or less, the minimum down payment is 5%. Between $500,000 and $999,999, it is 5% on the first $500,000 and 10% on the remainder. For homes at $1,000,000 or above, a minimum of 20% is required. If your down payment is less than 20%, you will also need to pay for mortgage default insurance through CMHC or another insurer.
Here is the key connection between the two: your deposit is credited toward your down payment at closing. If you have agreed to a down payment of $60,000 and your deposit was $25,000, your lawyer will collect the remaining $35,000 on closing day along with your other closing costs. The deposit does not disappear; it becomes part of the equity you are putting into the home.
One critical difference involves risk. If the deal collapses because a condition in your offer was not met, such as financing or a home inspection, you are entitled to a full refund of your deposit. If the deal goes firm and you then fail to close, the seller can claim your deposit as compensation for damages. This is why conditions in your Agreement of Purchase and Sale matter. What Is a Conditional Offer in Ontario Real Estate?
