How Much Deposit Do You Need With an Offer to Buy in Ontario?

When you make an offer on a home, you usually back it with a deposit. It shows the seller you are serious, and it is often the first real money you put at risk in the deal.

This article explains how the deposit is set, when it is due, who holds it and what can happen to it if the deal falls through. It is general information, so have a lawyer review your agreement before you sign.

How large should the deposit be?

The amount is negotiated and written into your offer. A larger deposit can make an offer look stronger, especially against competing offers, but it also puts more of your money at risk. A lawyer or agent can tell you what is typical for the property and market.

Do not confuse the deposit with your down payment. The minimum down payment is a separate rule: 5% for homes of $500,000 or less, 5% of the first $500,000 plus 10% of the portion above $500,000 for homes from $500,000 to $1.5 million, and 20% for homes of $1.5 million or more. Below 20% down, you will typically need mortgage loan insurance.

Where the money comes from also matters. For CMHC mortgage loan insurance, traditional down payment sources include a non-repayable financial gift from a relative. If a relative is helping, plan the paperwork early.

When is the deposit due?

The due date is set by your agreement. Often it is due on acceptance, but check your own document. Paying late or withholding it can itself breach the agreement. In RECO's example, a buyer who held back a deposit due on acceptance until after an inspection may have given the seller grounds to terminate and seek damages.

So a condition does not automatically pause your deposit. Unless the agreement says otherwise, do not assume you can wait.

Where the deposit is held

In a real estate deal, the deposit is normally held by the brokerage in a real estate statutory trust account. It is not paid to the seller on acceptance as spending money.

It can be released only with a mutual consent or release signed by all parties, or under a court order. Neither RECO nor the brokerage can pay it out until all parties agree.

Can you lose your deposit?

It depends on why the deal failed. If a condition is not met, then depending on its wording, the buyer may terminate or the contract may end automatically, with the deposit returned. Once all conditions are waived, the agreement is firm and binding, so walking away at that point can put your deposit at risk and may bring other claims.

If a dispute is unresolved, the brokerage may hold the deposit for two years. If it is still unclear who is entitled to it, the deposit goes to RECO, which also pays out only on consent or a court order. Consumer deposit insurance, up to $200,000 per claim, does not cover deposits that are simply in dispute, as opposed to missing or misappropriated.

New builds: Tarion deposit protection

If you are buying a new home from a builder, Tarion deposit protection may apply. For freehold agreements signed on or after January 1, 2018, it is up to $60,000 for homes up to $600,000, and 10% of the price to a maximum of $100,000 above that. For agreements signed before 2018 the maximum is $40,000, and for condominium units it is up to $20,000. Registration timing and recent changes can affect coverage, so confirm the current rules.

What to do before you hand over a deposit

• Read the deposit amount, due date and method of payment in your offer.
• Make sure your conditions are clearly written and that the deposit is returned if they fail.
• Confirm the brokerage will hold it in trust.
• Keep proof of payment.
• Have a real estate lawyer review the agreement before you sign.

Frequently asked questions