What Is a Deposit When Buying a Home?

When your offer is accepted, the first money you hand over isn't your down payment — it's the deposit. It's a sign of good faith that tells the seller you're committed, and it's held in trust until closing, when it's applied to your purchase. Deposits trip up a lot of first-time buyers, so here's exactly what a deposit is, how much to offer, and what happens to it.

Key takeaways

• A deposit is good-faith money submitted with or just after an accepted offer, held in trust until closing.
• Your deposit is part of your down payment — not an extra cost on top of it.
• In hot markets a larger deposit can strengthen your offer.
• If you walk away without a valid condition, you can lose your deposit.
• Plan your deposit and down payment together using the HOMEH affordability calculator.

What a deposit actually is

A deposit is money you provide to show the seller your offer is genuine. In Ontario it's usually delivered within 24 hours of an accepted offer (the exact timing is written into the Agreement of Purchase and Sale) and held in trust — typically by the listing brokerage — until the deal closes.

Crucially, the deposit isn't an extra fee. On closing day it's credited toward your total purchase price, which means it forms part of your down payment. If you put down a $40,000 deposit and your total down payment is $100,000, you'll bring the remaining $60,000 (plus closing costs) to closing.

Deposit vs down payment vs closing costs

These three terms get mixed up constantly. Here's the clean version: the deposit is an early instalment of your down payment, the down payment is your total equity contribution, and closing costs are separate one-time fees.

Minimum down payment reminder

Your deposit contributes to the minimum down payment: 5% under $500,000; 5% on the first $500,000 plus 10% above that up to $1,499,999; and 20% at $1,500,000 or more. Read the full breakdown in how much down payment you need in Ontario.

How much should your deposit be?

There's no fixed legal amount — it's negotiated. As a rough guide, deposits often land somewhere around 5% of the purchase price, but they swing higher in competitive markets and lower in slower ones. A larger deposit signals strength to a seller; a smaller one keeps more cash flexible until closing.

Have your deposit ready before you offer

Because the deposit is due fast — often within 24 hours — keep the funds liquid and ready before you submit an offer. A delayed deposit can sink a deal.

Can you lose your deposit?

Yes — which is why conditions matter. If your offer includes conditions (financing, home inspection, status certificate review) and one isn't met, you can typically walk away and recover your deposit. But if your offer is firm, or you back out for a reason not covered by a condition, you risk forfeiting the deposit.

Conditions protect your deposit

Never waive conditions lightly. Understand the difference in our guide to conditional vs firm offers before you sign.

Plan your deposit with HOMEH

Because your deposit is part of your down payment, plan them together. Map out the full purchase — deposit, down payment and closing costs — using the affordability calculator, and follow the complete process in our guide to buying a house in Ontario.

Get money back at closing

Eligible HOMEH buyers receive the industry's highest Cashback Rebate — cashback that lands back in your pocket and can offset your costs. Estimate yours with the cashback calculator.