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Down Payment vs. Deposit: A First-Time Home Buyer’s Guide for Stouffville & York Region

  • 2 days ago
  • 4 min read
Down Payment vs. Deposit

If you're buying your first home in Stouffville, Markham, or Uxbridge, you've probably heard the terms deposit and down payment used interchangeably. While they're closely related, they serve different purposes during a real estate transaction.


Understanding the distinction before you begin writing offers can help make the home-buying process much easier to follow—and prevent confusion when your lawyer prepares your closing documents.


The Deposit: Your Good-Faith Money

The deposit is the money submitted with your signed Agreement of Purchase and Sale after your offer has been accepted. It demonstrates your commitment to purchasing the property and forms part of your overall down payment.


Across the GTA, deposits often range from 3% to 5% of the purchase price, although the amount is entirely negotiable. In competitive, multiple-offer situations, buyers sometimes submit larger deposits to strengthen their offer and demonstrate financial readiness.


A few things to know about deposits:


  • Timing: The deposit is typically due within 24 hours (or by the next business day) after an offer is accepted, unless the agreement specifies otherwise.

  • Form of payment: Most brokerages require a bank draft, certified cheque, or wire transfer. Personal cheques are generally not accepted.

  • Held in trust: The deposit is held in the listing brokerage's trust account until closing. In Ontario, brokerage trust accounts are regulated, and eligible deposits receive protection through RECO's deposit insurance program.

  • If the transaction doesn't close: Whether the deposit is returned depends on the terms of the Agreement of Purchase and Sale. If a buyer properly exercises a contractual condition—such as financing or home inspection—the deposit is generally returned. If a buyer fails to complete the purchase without a legal basis, the deposit may be forfeited and could become the subject of further legal proceedings.


The Down Payment: Your Equity in the Home

The down payment is the total amount you contribute toward the purchase price using your own funds. The remainder is financed through your mortgage.


As of 2026, Canada's minimum down payment requirements are:


  • 5% on the first $500,000

  • 10% on the portion between $500,000 and $1.5 million

  • 20% on homes priced at $1.5 million or more


If your down payment is less than 20%, mortgage default insurance is generally required through providers such as CMHC, Sagen, or Canada Guaranty. The insurance premium is typically added to the mortgage; however, the applicable 8% Ontario provincial sales tax on that premium must usually be paid in cash at closing.


Where the Deposit and Down Payment Overlap

One of the most common areas of confusion is that the deposit forms part of the down payment—it is not an additional payment on top of it.


For example, suppose you're purchasing a $900,000 home with a 10% down payment, or $90,000. If you submitted a $45,000 deposit when your offer was accepted, that amount is credited toward your down payment. At closing, you would provide the remaining $45,000, along with your closing costs, such as land transfer tax, legal fees, and title insurance.


Why Understanding the Difference Matters

One of the biggest surprises for first-time buyers isn't necessarily how much money is required—it is when each payment is due.


The deposit is typically required shortly after an offer is accepted, while the remainder of the down payment and closing costs are due on closing day. Because these payments occur at different stages of the transaction, buyers often find themselves planning not only the total amount they need but also when those funds must be available.


Another area that commonly raises questions is where the money comes from. Down payments may be made up of personal savings, gifts from immediate family members, or registered programs such as the First Home Savings Account (FHSA) and the RRSP Home Buyers' Plan (HBP). Before closing, lenders and lawyers typically require documentation showing the source of these funds.


Final Thoughts on Down Payment vs. Deposit

The deposit and the down payment are closely connected, but they serve different purposes within a real estate transaction.


The deposit demonstrates a buyer's commitment once an offer has been accepted, while the down payment represents the buyer's financial contribution toward the purchase at closing. Since the deposit is applied toward the down payment, understanding how the two work together helps make the overall buying process easier to understand.


Whether you're purchasing your first home in Stouffville, Markham, Uxbridge, or elsewhere in York Region, this is one of the concepts that often becomes much clearer once buyers see how funds move from an accepted offer through to closing.


Buying a home involves many moving parts, and understanding how each step works can make the process feel far less overwhelming. My goal is to help people better understand Ontario real estate by sharing practical information and local market insights.

If you're buying, selling, or simply exploring the market in Stouffville, Markham, Uxbridge, or elsewhere in York Region, I hope these articles help you make more informed housing decisions.



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