Glossary
Deposit
A deposit is money paid with an offer to purchase a home, held in trust and applied to the purchase price on closing..
A deposit is money a buyer pays along with an offer to purchase a home, showing good faith and later applied to the purchase price. It is not an extra fee; it reduces the balance you owe on closing. In Canada, the deposit is normally held in trust by the seller's brokerage or a lawyer until the deal closes or the conditions are satisfied.
How a deposit fits into the purchase
When you write an offer with an Agreement of Purchase and Sale, the deposit accompanies it. Once both parties agree and any conditions (financing, inspection, condo document review) are removed, the deposit generally becomes non-refundable if you fail to complete. The amount is credited toward your purchase price at closing, so it reduces the cash you need on closing day rather than adding to it.
Deposits are separate from your down payment, though the deposit is effectively the first portion of it. Your lender still requires the full down payment, and the deposit is counted as part of that total.
How much is a deposit?
There is no fixed legal amount. In many Canadian markets, deposits range from a small sum to a few percent of the purchase price, and in competitive situations buyers may offer more. In some provinces, real estate regulators set minimum requirements for deposits on resale transactions; confirm the current rule with your provincial regulator or real estate board.
- Custom: driven by local market norms and competition.
- Provincial rules: some jurisdictions prescribe a minimum.
- New builds: builders often structure deposits in stages, sometimes larger overall.
Why it matters to a borrower
The deposit ties up cash early and can be lost if you cannot complete. Before offering, confirm your financing path — including the federal mortgage stress test — so you are not relying on a condition you cannot satisfy. Deposits are usually paid by cheque or bank draft, and you should get a receipt and confirm who holds the funds. If a deal collapses for a permitted reason, the deposit is typically returned; if you simply walk away, it may not be.
Ask your lawyer or notary how the deposit will be treated in your province, and keep records of the payment.
Frequently asked questions
Is a deposit the same as a down payment?
Not exactly. The deposit is paid up front with the offer and credited toward the purchase price at closing. It counts as part of your down payment, but your lender still expects the full down payment, and any shortfall between the deposit and the required down payment comes from your own funds.
Can I lose my deposit if my financing falls through?
If your offer includes a financing condition and you cannot obtain financing before the deadline, you can typically walk away and recover the deposit. Once conditions are removed, the deposit generally becomes non-refundable, so review the wording with a lawyer or notary before signing.
Who holds the deposit in Canada?
Most often the deposit is held in trust by the seller's real estate brokerage, a lawyer, or a notary until closing or until conditions are satisfied. Always obtain a receipt and confirm in writing which party is holding the funds and under what terms.
Sources
Related terms
- Down Payment — A down payment is the portion of a home's purchase price a buyer pays upfront, reducing the amount borrowed through a mortgage.
- Agreement of Purchase and Sale — The written contract between buyer and seller that sets the price, deposit, closing dates, and conditions of a real estate transaction.
- Closing Costs — Closing costs are the one-time fees, taxes, and charges paid on top of a home's purchase price, separate from the down payment.
- Firm Offer — An offer to buy a home with no conditions attached, which the buyer cannot withdraw once the seller accepts it.
- Conditional Offer — A conditional offer is an offer to buy a home that only becomes binding once stated conditions, such as financing or inspection, are met or waived.