Deposit vs Down Payment in Ontario: Not the Same Thing

By Jatin Dua · Broker of Record, RE/MAX Quantum Realty · Updated September 10, 2026 · 10 min read — where the deposit goes, when the down payment moves, what happens to your money if the deal dies, and the land transfer tax you have to bring in cash.

What is the difference between a deposit and a down payment?

They are two different sums of money, moving at two different times, for two different reasons, held by two different people. Buyers routinely use the words interchangeably and it causes real problems — usually when somebody assumes the deposit is refundable because they think of it as part of their savings rather than as consideration they have already put on the table.

The relationship between them is simple: the deposit is part of the down payment. It is not extra money. If your down payment is $200,000 and your deposit was $40,000, you bring the remaining $160,000 — plus land transfer tax, legal fees and adjustments — to your lawyer before closing.

Where does the deposit actually go?

Into the listing brokerage’s real estate trust account. Not to the seller. Not to the seller’s lawyer. Not into your agent’s bank account. A brokerage’s real estate trust account is a regulated account, separate from the brokerage’s own money, and the funds in it are held for the parties to the transaction, not for the brokerage.

That structure matters for the reason most people never think about: once the money is in trust, the brokerage cannot simply give it back to you because you have changed your mind, and cannot simply hand it to the seller because they are annoyed with you. A brokerage may only pay trust money out in accordance with the agreement, on the written agreement of both parties, or on a court order. That is the whole list.

Practically, the deposit is delivered by bank draft or certified cheque, or by an electronic deposit service that many brokerages now use. Plan for it. A bank draft takes a trip to a branch, drafts drawn against a recent transfer can be delayed by a hold, and the deadline in the agreement does not care that your money is sitting in a savings account with a two-day transfer window.

What does “herewith” or “upon acceptance” mean on the offer?

The deposit clause in the standard Ontario agreement asks the buyer to say when the deposit is coming, and the two ordinary answers behave differently.

• Herewith means the deposit is delivered with the offer itself. The draft is attached to the paperwork before the seller has agreed to anything. It is the strongest signal a buyer can send about the reliability of their money, and it is occasionally used to make a strong offer stronger. If the offer is not accepted, the deposit comes back.
• Upon acceptance means the deposit follows the acceptance. Under the standard form wording that is a short, fixed window — typically 24 hours from acceptance — and the exact requirement is written into the clause in front of you, so read it rather than assuming.

If you sign an offer at 11 p.m. on a Saturday with the deposit due upon acceptance, work out before you sign how the draft is going to be produced on Sunday. This is one of the most common self-inflicted wounds in a residential purchase, and it is entirely avoidable.

What happens to the deposit if the deal closes normally?

Nothing dramatic, which is the point. The deposit stays in the listing brokerage’s trust account until closing. On the statement of adjustments your lawyer prepares, the deposit appears as a credit to you against the purchase price, so you only bring the balance. On closing, the brokerage releases the deposit in accordance with the agreement — in the ordinary case, against the commission owed on the sale, with the remainder flowing to the seller through the lawyers.

From your side, the money you already paid simply reduces what you owe. It never comes back to you as a cheque, and it should not: you spent it on the house.

What happens if a condition is not waived?

If a condition period expires without the buyer waiving or fulfilling it, the standard Ontario clauses provide that the agreement becomes null and void and the deposit is returned to the buyer in full without deduction. That is the deal both parties struck, and in the overwhelming majority of cases it is exactly what happens.

Here is the part nobody explains until it is happening to them: the brokerage still cannot release the money on its own. Trust funds come out on the terms of the agreement, on the written agreement of both parties, or on a court order. In practice that means a mutual release — a document signed by the buyer and the seller confirming the deal is over and directing where the deposit goes.

What happens if the buyer just walks away?

This is where the deposit stops being a formality. If a buyer fails to close a firm agreement, the deposit is at risk, and Ontario courts have generally treated a true deposit as forfeited to the seller on the buyer’s default — the deposit’s whole function is to stand as security for performance. Relief from forfeiture exists but it is exceptional, not a fallback.

Worse, forfeiture is not necessarily the end of it. If the seller resells for less and can prove their loss, they may claim the difference plus carrying costs and the expenses of the second sale, with the forfeited deposit credited against the claim. A buyer who walks away from a firm deal in a softening market is exposed to more than the money they have already paid.

This is the practical answer to the question people are really asking when they compare a deposit and a down payment. Your down payment sits in your own account until the day of closing. Your deposit is out of your hands within a day of acceptance and is legally the seller’s security. One of them you can still decide about. The other you have already committed.

How large should the deposit be?

There is no rule and no legal minimum. Anybody who tells you the deposit must be a particular percentage is describing a habit, not a requirement. The amount is negotiated in the offer like every other term.

What is true is that the deposit is read as a signal. A seller comparing two offers at the same price sees a larger deposit as evidence that the buyer has the money, has organized it, and would have a great deal to lose by not closing. That is genuine information about risk, and it is one of the few ways a buyer can strengthen an offer without raising the price.

Set the number against three things: what you can actually produce as certified funds inside the window in the agreement; how much you are willing to have tied up if the deal ends badly; and how competitive the situation is. A deposit you cannot deliver on time is worse than a modest one delivered without drama.

What is the down payment, and when does it move?

The down payment is the portion of the purchase price you are funding yourself rather than borrowing. Minimum down payment requirements are set federally and step up with the purchase price, and mortgage default insurance rules limit what can be insured — your lender or mortgage broker will confirm the figure that applies at your price point before you make an offer, and you should have that in writing rather than in your head.

The timing is the part that surprises first-time buyers. Your lawyer will tell you, usually a few days before closing, the exact amount of certified funds to deliver. That figure is the balance due on closing after the mortgage advance and the deposit credit, plus land transfer tax, plus the legal fee and disbursements, plus adjustments for prepaid property tax or condominium common expenses. If your money is in investments, in a locked account, or being gifted by a family member who is travelling, start moving it early. Lawyers cannot close on a promise.

Why does land transfer tax have to be paid in cash?

Because it is a tax on the registration of the transfer, paid by your lawyer at the moment of registration, out of the funds you delivered. It cannot be added to your mortgage, and no lender advances against it. It is a separate cost on top of your down payment, and it is the single largest closing cost on most Toronto purchases.

Etobicoke sits inside the City of Toronto, so a purchase here attracts both the provincial land transfer tax and the Toronto Municipal Land Transfer Tax. Here is what that looks like at real Etobicoke price points. For context, TRREB reported an average Etobicoke sale price of $1,049,793 across 243 sales in August 2026.

If you are a first-time buyer, your lawyer claims the rebates at registration — up to $4,000 from Ontario and up to $4,475 from Toronto, for up to $8,475 combined inside the city. Tell your lawyer at the first meeting. If the Toronto rebate is missed at closing it can be applied for within 18 months, but that is a recovery exercise rather than a plan.

One more note, because it comes up constantly: the City of Toronto added new upper brackets effective 1 April 2026, running from 4.40% between $3 and $4 million up to 8.60% above $20 million. Nothing at or below $3 million changed. The totals in the table above are unchanged by that measure.

What does the whole cash requirement look like in practice?

Take a $1,000,000 purchase in Etobicoke with a $200,000 down payment and a $40,000 deposit. You paid $40,000 on acceptance, into the listing brokerage’s trust account. Before closing you deliver the remaining $160,000 of down payment to your lawyer, plus $32,950 of land transfer tax, plus the legal fee, disbursements and title insurance, plus whatever the adjustments come to for prepaid property tax. The mortgage advance covers the other $800,000 and arrives from your lender directly into your lawyer’s trust account on closing day.

Written out that way, the difference between the two words is obvious. One is a commitment you make at the beginning. The other is a payment you complete at the end. Confusing them is how buyers end up short on closing week.

Frequently asked questions

Sources

• Ontario Ministry of Finance — Land Transfer Tax — the provincial brackets used in the worked table and the first-time purchaser refund of up to $4,000. Accessed 10 September 2026.
• City of Toronto — Municipal Land Transfer Tax — the Toronto brackets, the rebate of up to $4,475, the 18-month window and the bands effective 1 April 2026. Accessed 10 September 2026.
• Real Estate Council of Ontario — brokerage real estate trust accounts and the handling of deposits. Accessed 10 September 2026.
• TRREB Market Watch, August 2026 — the Etobicoke average sale price of $1,049,793 across 243 sales, released 3 September 2026. Accessed 10 September 2026.
• Financial Consumer Agency of Canada — mortgages — minimum down payment requirements and mortgage default insurance rules. Accessed 10 September 2026.

Related reading

• RRSP Home Buyers’ Plan 2026: $60,000 Limit and New Repayment Timeline
• How deposits are held in a brokerage trust account
• When a buyer fails to close: deposits and seller remedies
• How long does a conditional offer last in Ontario?
• What a real estate lawyer actually does in Ontario