The deposit on a house in Ontario and how it differs from your down payment

The short answer

The deposit on a house in Ontario is a payment you make when you put in an offer. It is not paid to the seller on the spot. It is held in trust until the deal completes or falls apart. The down payment is a different thing. It is the share of the price you pay from your own funds so that a mortgage can cover the rest.

People mix the two up because both involve a large amount of your own money and both are usually discussed at the same stage. They have different jobs, different protections and different questions attached to them. This guide explains each and tells you where the rules come from.

One point up front. We reviewed the Real Estate Council of Ontario (RECO), the Financial Consumer Agency of Canada, Tarion and Ontario.ca. None of them sets a required deposit amount or percentage for a resale home. We will not quote a typical figure here, because no primary source supports one. Your agreement of purchase and sale sets the number.

Deposit versus down payment at a glance

	Deposit	Down payment
What it is	Money you put forward with your offer	The amount you put towards the purchase of the home
Who sets the amount	The terms of your agreement of purchase and sale	Your own funds, subject to the federal minimums
Where it sits	In trust until the sale completes or fails	Paid on closing, with the mortgage covering the rest
Minimum rule	No required amount found in the sources we reviewed	5%, 10% or 20% depending on price
What protects it	Consumer deposit insurance plus Tarion on new builds	Not applicable

The table is a summary, not a rule book. Your lawyer will show you how the deposit is credited when your purchase closes.

What is a deposit when you buy a house?

A deposit is money you give when you make an offer so the seller can see you are committed. If the offer is accepted, the deposit stays in the transaction rather than going into anyone’s pocket.

Ontario.ca says that if you make a deposit on a new condominium the developer must make sure it is held in trust. RECO describes consumer deposits in the same way: they should be securely held in trust.

Two practical consequences follow:

1. The deposit is your money until the agreement says it becomes part of the purchase.
2. If something goes wrong, the question is always who is entitled to the money, not whether it exists.

When is the deposit due?

The due date is a term of your agreement of purchase and sale. The sources we reviewed do not set a universal deadline, so read the clause that sets the timing before you sign and ask your representative to explain it in plain words.

Questions to settle before you sign:

• What is the exact amount and the form of payment accepted?
• By what date and time must the deposit be delivered?
• Which brokerage or lawyer is named as the holder?
• What conditions in the agreement affect whether the deposit is returned?

If your timeline is tight, tell us early. We can help you plan the funds so the deposit is ready when it is due. You can read more about the whole process on our buyers page.

Who holds the deposit?

Ontario real estate brokerages keep client deposits in a real estate trust account. RECO Bulletin 8.1 on unclaimed money refers to money held in the trust account and to the records a brokerage keeps for each transaction, including the agreement of purchase and sale and trust transaction records. A trust account is a separate account for money that does not belong to the brokerage.

For a new condominium, Ontario.ca says the developer must hold your deposit in trust. For a new freehold home, Tarion’s page ties its coverage to the builder’s obligations, which we cover below.

When money sits in trust longer than it should, there is also a rule for that. RECO says all unclaimed money held in trust for more than two years must be paid to RECO. For interest-bearing accounts, the original deposit and any interest go to RECO. Amounts under $25.00 are exempt from mandatory forwarding. This rule is about stale or unresolved funds, which is rare, but it shows the system treats deposits as someone else’s money.

What protects your deposit?

Consumer deposit insurance

RECO says all brokers and salespersons must participate in an insurance programme that includes consumer deposit insurance. The programme is free to consumers. Its published details are:

Feature	What RECO says
Events covered	Brokerage theft, fraud, insolvency or misappropriation of funds
Maximum per individual claim	$200,000
Maximum for all claims from a single event	$4 million, with larger totals paid out on a pro-rated basis
Deductible	None

Ontario.ca describes the same protection, saying consumers may be covered up to $200,000 per claim.

RECO is equally clear about what the insurance does not do. It does not respond to disputes where the parties disagree on how the deposit should be disbursed. Those need mutual written consent or a court order. If you suspect a problem with a deposit, RECO tells consumers to contact its Insurance Department right away and to submit a completed Consumer Deposit Notice of Claim Form with supporting documentation.

Tarion on new homes

If you buy a new home from a builder, a separate protection applies. Tarion’s page sets out these deposit amounts:

Type of home	Coverage
Freehold, agreement signed before January 1, 2018	Up to $40,000
Freehold, agreement signed on or after January 1, 2018, price $600,000 or less	Up to $60,000
Freehold, agreement signed on or after January 1, 2018, price over $600,000	10% of the price, to a maximum of $100,000
Condominium unit	Up to $20,000

Tarion says the protection responds when the builder declares bankruptcy or fundamentally breaches the agreement. It also responds when you have a statutory right to terminate. For condominiums the deposit must be held in trust as the Condominium Act requires. Coverage applies when the builder fails to return the deposit within 10 days of the agreement ending.

Tarion also describes a registration step for new freehold purchasers that affects the coverage available. Its published materials give different start dates, so check Tarion’s current page and ask your lawyer what applies to your agreement. Our new construction service page explains how we help buyers of new homes.

How the down payment works

The Financial Consumer Agency of Canada describes the down payment as the amount of money you put towards the purchase of a home. The lender subtracts it from the purchase price and the mortgage covers the remainder.

The agency publishes these minimums:

Purchase price	Minimum down payment
$500,000 or less	5%
Over $500,000 up to $1.5 million	5% of the first $500,000 plus 10% of the amount above $500,000
$1.5 million or more	20%

Here is an illustrative example, not a real purchase. On an $800,000 home the minimum is 5% of $500,000, which is $25,000. Add 10% of the remaining $300,000, which is $30,000. The total is $55,000, which is 6.9% of the price.

If your down payment is under 20%, the agency says you typically must buy mortgage loan insurance, which protects the lender and not you. Premiums range from 0.6% to 4.5% of the mortgage amount depending on the size of your down payment. The down payment also decides how much you need to borrow, so it feeds directly into your closing numbers. Our guide to closing costs for Ontario buyers shows the other bills that arrive at the same time.

Where the money comes from

Buyers often draw on more than one source. Registered savings may be an option for first-time buyers. Our post on the FHSA and the Home Buyers’ Plan explains the rules. Ask your accountant how long a withdrawal takes before you commit to a deposit due date.

If you are buying for the first time, our first-time home buyers guide for Markham walks through the steps from budgeting to closing.

A checklist before you sign

• Read the clause on the deposit amount, the due time and the named holder.
• Ask which conditions would allow the deposit to be returned.
• Confirm in writing how the deposit will be accounted for on closing.
• Check that your down payment funds will be available on closing day.
• On a new build, ask your lawyer to check Tarion’s current coverage and registration steps.
• Keep proof of every payment you make.

Our post on closing day in Ontario explains what happens in order. This article explains how the rules work in general. Your lawyer should confirm how they apply to your agreement. If you would like to talk through the numbers before you make an offer, contact us.