Deposit vs. Down Payment: Key Differences for Homebuyers
Carla Sturm • May 27, 2026
When you’re buying a home, two terms often cause confusion: deposit and down payment. While they’re related, they serve very different purposes in the homebuying process.
Here’s what you need to know.
What Is a Deposit?
A deposit is the money you provide when you make an offer on a property. Think of it as a show of good faith that proves you’re serious about purchasing.
- How it works: Typically, you provide a certified cheque or bank draft that your real estate brokerage holds in trust. If your offer is accepted, the deposit remains in trust until the deal moves forward. If negotiations fall through, the deposit is refunded.
- Connection to your down payment: Once the sale is finalized, your deposit becomes part of your total down payment.
- Why it matters: The amount is negotiable, but a larger deposit can make your offer more attractive in a competitive market. Keep in mind, however, that if you back out after conditions are removed, you risk losing your deposit.
What Is a Down Payment?
Your down payment is the amount you contribute toward the purchase price of your home when securing a mortgage.
- Minimum requirement: In Canada, the minimum down payment is 5% of the home’s purchase price. Anything less than 20% requires mortgage default insurance.
- Sources: Down payments can come from your savings, the sale of another property, RRSP withdrawals (through the Home Buyers’ Plan), a gift from family, or even borrowed funds.
Example: How They Work Together
Imagine you’re buying a $400,000 home with a 10% down payment ($40,000).
- When you make your offer, you provide a $10,000 deposit.
- Once conditions are met, that deposit is transferred to your lawyer’s trust account.
- At closing, you add the remaining $30,000 to complete your full down payment.
- The lender provides the rest—$360,000—through your mortgage.
The Bottom Line
Your deposit shows commitment and secures your offer, while your down payment is what makes the mortgage possible. Together, they work hand in hand to get you into your new home.
📞 If you’d like clarity on deposits, down payments, or any other part of the mortgage process, let’s connect. I’d be happy to walk you through it step by step.
Retirement doesn’t always mean a mortgage-free life anymore. And that’s okay. Between higher home prices, rising living costs, and longer life expectancy, many Canadians are choosing to retire with a mortgage or refinance later in life to create more flexibility. The goal isn’t perfection. It’s having options that actually support the life you want to live. If you’re thinking about how a mortgage fits into your retirement years, you’re not alone—and you’re not out of options. Why work with an independent mortgage professional? Because retirement financing is not one-size-fits-all. Unlike a single bank, an independent mortgage professional can look across multiple lenders and solutions to find what truly fits your income, equity, and long-term plans—not just what one institution offers. Mortgage options available in retirement Traditional Mortgage Solutions Many retirees still qualify for standard mortgages. Pension income, investment income, and other retirement sources can often be used to support an application. If you have good equity and solid credit, this is often the lowest-cost option. Reverse Mortgages For homeowners 55+, a reverse mortgage can unlock tax-free equity from your home with no monthly payments required. There’s no income verification or medical questions, making it a helpful option for those who want to improve cash flow while staying in their home. Home Equity Line of Credit (HELOC) A HELOC allows you to access your home equity as needed and only pay interest on what you use. Many retirees appreciate the flexibility and like consolidating income and expenses in one place. Private Financing Sometimes life throws a curveball. If timing, income, or credit create challenges, private financing can act as a short-term bridge. It’s not usually the first choice, but it can provide solutions when traditional lenders can’t. If you’re approaching retirement—or already there—and wondering how your mortgage fits into the picture, let’s talk. A clear plan can make retirement feel a lot more secure and a lot less stressful.
Don’t Forget About Closing Costs When planning to buy a home, most people focus on saving for the down payment. But the truth is, that’s only part of the equation. To actually finalize the purchase, you’ll also need to budget for closing costs —the out-of-pocket expenses that come up before you get the keys. Closing costs can add up quickly, which is why they should be part of your pre-approval conversation right from the start. Lenders will even require proof that you’ve got enough funds set aside. For example, if you’re getting an insured (high-ratio) mortgage, you’ll need at least 1.5% of the purchase price available in addition to your down payment. That means a 10% down payment actually requires 11.5% of the purchase price in cash to make everything work. Let’s break down some of the most common expenses you should prepare for: 1. Home Inspection & Appraisal Inspection : Paid by you, this gives peace of mind that the property is in good shape and doesn’t have hidden problems. Appraisal : Required by the lender to confirm value. Sometimes this is covered by mortgage insurance, sometimes by you. 2. Legal Fees A lawyer or notary is required to handle the title transfer and make sure the mortgage is properly registered. Legal fees are often one of the larger closing costs—unless you’re also responsible for property transfer tax. 3. Taxes Many provinces charge a property or land transfer tax based on the home’s purchase price. These fees can range from hundreds to thousands of dollars, so you’ll want to factor them in early. 4. Insurance Property insurance is mandatory—lenders won’t release funds without proof that the home is insured on closing day. Optional coverage like mortgage life, disability, or critical illness insurance may also be worth considering depending on your financial plan. 5. Moving Costs Whether you’re renting a truck, hiring movers, or bribing friends with pizza and gas money, moving comes with expenses. Cross-country moves especially can be surprisingly pricey. 6. Utilities & Deposits Setting up new services (electricity, water, internet) can involve connection fees or deposits, particularly if you don’t already have a payment history with the utility provider. Plan Ahead, Stress Less This list covers the big-ticket items, but every purchase is unique. That’s why it pays to have an accurate estimate of your personal closing costs before you make an offer. If you’d like help planning ahead—or want a breakdown tailored to your situation—let’s connect. I’d be happy to walk you through the numbers and make sure you’re fully prepared.
