Deposit vs. Down Payment: Key Differences for Homebuyers
Josh Perez • February 18, 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.
Watch the video that inspired this post: Divorce and Your Mortgage, Where to Start One of the Most Overlooked Financial Conversations in a Divorce Divorce is one of the most emotionally and financially complex situations a person can go through. There are lawyers, mediators, custody arrangements, and asset divisions all happening at once. In the middle of all of that, the mortgage often gets treated as an afterthought — something to sort out once the dust settles. That's a mistake. The mortgage is usually the largest financial asset — and the largest liability — in the marriage. How it gets handled during separation can affect your credit, your borrowing power, and your ability to buy a new home for years to come. Here's where to start. Step 1: Understand What You're Actually Dealing With Before any decisions are made, you need a clear picture of the mortgage as it stands today. That means knowing the current balance, the interest rate, the term and maturity date, and whether there are any prepayment penalties for breaking the mortgage early. This matters because the options available to you — and the costs associated with each — depend entirely on these details. A mortgage with two years left on a fixed term and a significant penalty to break is a very different situation from one that's coming up for renewal in three months. Get the mortgage statement. Read it carefully. Or better yet, have a mortgage professional review it with you so you understand exactly what you're working with before you sit down with a lawyer or mediator. Step 2: Know Your Three Main Options Option 1: One Spouse Buys Out the Other This is the most common outcome when one person wants to stay in the home. The spouse who is keeping the property refinances the mortgage in their name alone, uses the proceeds to pay out the departing spouse's share of the equity, and takes on full ownership and full responsibility for the debt. The critical question here is whether the staying spouse can qualify for the mortgage on their own . This is where a lot of people get a rude awakening. What two incomes could support may not be supportable on one. A mortgage professional can run the numbers before you make any commitments — saving you from agreeing to something in mediation that you can't actually execute at the lender. Option 2: Sell the Property and Split the Proceeds When neither party can or wants to keep the home, selling is often the cleanest solution. The mortgage gets paid out from the sale proceeds, any remaining equity is divided according to the separation agreement, and both parties walk away with a clean slate. The timing of a sale matters here. If the mortgage has a significant prepayment penalty, it may be worth waiting until the term matures — or factoring that penalty into the negotiation of who gets what. Option 3: Both Names Stay on the Mortgage Temporarily In some cases, especially when children are involved and one parent needs time to stabilize financially, both spouses remain on the mortgage for a defined period while one continues to live in the home. This can work, but it carries real risk: both parties remain legally responsible for the debt, and any missed payments will affect both credit files — regardless of what the separation agreement says. If you go this route, the timeline for transitioning to one of the first two options needs to be clearly defined and legally documented. Step 3: Protect Your Credit Before Anything Else Here's something people don't always think about in the chaos of a separation: your credit file doesn't care about your personal circumstances. If the mortgage payment is missed because you and your ex couldn't agree on who was paying it this month, both of your credit scores take the hit. Until the mortgage is formally dealt with — either through a buyout, a sale, or a documented interim arrangement — make sure payments are being made on time, every time. The cost of a missed payment on your credit report will follow you long after the divorce is finalized. Step 4: Get Independent Mortgage Advice Early A family lawyer will guide you through the legal side of the separation. But they are not mortgage specialists. The mortgage piece — what you qualify for on your own, what the penalties are, what your options look like — needs input from someone who works in that space every day. Getting that advice early, before the separation agreement is signed, means you're making decisions based on what's actually possible — not what sounds fair in a room without the financial details in front of you. "The mortgage doesn't pause for a divorce. The sooner you understand your options, the more control you have over what comes next." — Josh Perez Moving Forward: Your Next Chapter Starts With Clarity Whether you're keeping the home, selling it, or starting fresh in a new place, the path forward is clearer when you understand your mortgage situation completely. I work with clients going through separation regularly, and the ones who get the mortgage conversation started early consistently end up in a stronger position — both financially and emotionally. My consultations are completely free. No pressure, no judgment — just a clear, honest look at your numbers and your options so you can make informed decisions during one of the most important transitions of your life.  Ready to get clarity on your mortgage situation? Book your free consultation today and let's figure out your best path forward.
For most Canadians, the down payment is the biggest hurdle to homeownership. A down payment is the initial amount you contribute toward your property purchase, while the lender covers the rest through a mortgage. By law, Canadian lenders can only finance up to 95% of a property’s value, which means you’ll need at least 5% down to qualify. If you’re putting down less than 20%, your mortgage must be insured through one of Canada’s three default insurance providers— CMHC, Sagen (formerly Genworth), or Canada Guaranty . This insurance comes at a cost, but it can be rolled into your mortgage amount. The less you put down, the higher the premium. Since saving a down payment can feel overwhelming, it helps to know the different sources you can draw from. Here are the most common options available to Canadian homebuyers: 1. Savings & Personal Resources The most straightforward source is your own savings. Lenders will ask to see a 90-day history of the funds in your account. Any large deposits outside of regular payroll must be explained with documentation—such as the sale of a vehicle or a transfer from an investment account. This requirement isn’t just red tape; it’s part of Canada’s anti-money laundering rules. 2. Proceeds from the Sale of a Property If you’ve recently sold another home, you can use the proceeds as a down payment on your new purchase. Proof of the sale—such as the final statement of adjustments from your lawyer—will be required. 3. RRSP Home Buyers’ Plan (HBP) First-time buyers can withdraw up to $35,000 each (or $70,000 as a couple) from their RRSPs to put toward a down payment under the federal Home Buyers’ Plan . The funds are withdrawn tax-free, but they must be repaid over a 15-year period. This is a popular option for buyers who have been steadily contributing to their retirement savings. 4. Gifted Down Payment With today’s housing prices, many buyers turn to family for help. A parent or immediate family member can provide a gift that makes up part—or even all—of the required down payment. The lender will require a signed gift letter confirming that the money is a true gift (with no repayment expected) and proof that the funds have been deposited into your account. 5. Borrowed Down Payment In some cases, you may be able to borrow your down payment. This option is usually available only if you have strong credit and sufficient income. The payments on the borrowed funds are factored into your debt service ratios, so affordability is key. Lenders typically use 3% of the outstanding balance when calculating the additional payment. The Bottom Line A down payment doesn’t have to come from just one source—it can be a combination of savings, gifted funds, RRSPs, or other resources. What matters most is being able to show where the money came from and that it meets lender requirements. If you’d like to explore your options or learn how much you might qualify for, it’s never too early to start the conversation. Connect with us today—we’d be happy to help you create a plan and take the first steps toward homeownership.
