Your Deposit & Down Payment
When preparing to buy a home, it is essential to understand the distinction between your deposit and your down payment.
Deposit
When is it paid?
Your deposit is typically provided with your offer and forms part of the total purchase price — it is not an additional cost on top of your down payment.
How much is it?
In Toronto, a deposit of approximately 5% of the purchase price is common, but there is no universal amount that applies to every transaction.
In a competitive situation, a larger deposit can be a strategic tool. A stronger deposit may demonstrate your commitment to the purchase and can help strengthen an offer when sellers are comparing multiple bids.
The right amount will depend on the property, the market, and the overall strategy behind your offer.
Where does it go?
Once your offer is accepted, the deposit is typically held in trust by the listing brokerage in accordance with the terms of the agreement.
It is important to understand that your deposit is not simply refundable if a transaction does not close. Where there is a dispute over entitlement to the deposit, the funds generally cannot be released without the required agreement of the parties or a court order.
We’ll discuss the appropriate deposit amount and the implications of your deposit before you make an offer.
Down Payment
Your down payment is the portion of the purchase price you are contributing toward the purchase rather than borrowing through your mortgage.
The minimum required down payment depends on the purchase price and your financing situation. If you are putting less than 20% down, mortgage loan insurance will generally be required, subject to the applicable rules.
Your mortgage professional will confirm the amount you qualify for and the funds you’ll need to have available.