How you make an offer on a house requires a buyer to meet certain minimums, most notably as it relates to a down-payment.

How much is a down-payment on a house? For a lender to grant the remaining funds to finance a real estate purchase, you are legally required to provide a minimum down-payment of 5% of the purchase price of the home and sometimes more, depending on the home’s value.

Here are the ins and outs of down-payments and deposits when making an offer on a house.

How Down-Payments Work In Canada

The federal government sets minimum down-payment requirements, which vary based on the purchase price of the property:

  • For a home priced at or under $500,000, the minimum down-payment is 5% plus the cost of mortgage insurance.
  • For a home between $500,000 and $1.5 million, the minimum down-payment is 5% on the first $500,000, plus 10% on the portion above $500,000, with mortgage insurance required if under 20% down.
  • For a home valued at over $1.5 million, the minimum down-payment is 20%. These homes are not eligible for mortgage insurance.

It also bears in mind that it was only as of December 15, 2024 that the cap for insured mortgages increased from $1 million to $1.5 million.

This means buyers purchasing homes up to $1.5 million can now qualify for lower down-payment options (with mortgage insurance), a move which increased hosing affordability in higher-priced markets like Toronto and the GTA.

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New Rules for First-Time Home Buyers

Another significant change is the introduction of a 30-year amortization period for insured mortgages, now available to first-time homebuyers purchasing resale homes, and buyers of new builds, regardless of whether they are first-time purchasers

This extended amortization can lower monthly mortgage payments, making homeownership more manageable even if it doesn’t reduce the upfront down-payment requirement.

If you’re purchasing your first home, combining the lower down-payment thresholds with the 30-year amortization option could improve both your eligibility and long-term affordability.

Tips for Saving for a Down-Payment

Understandably, even with the aforementioned programs to help, a down-payment requires disciplined saving to achieve the minimums required. As realtors, here are a few proven strategies that we know our clients have used to achieve the number they set for themselves.

  • Automate your savings: Set up automatic transfers into a dedicated home savings account.
  • Reduce high-interest debt: Paying off credit cards and loans frees up cash for saving.
  • Cut back on discretionary spending: Small changes – like reducing dining out or subscription services – add up over time.
  • Use windfalls wisely: Apply bonuses, tax refunds, or inheritance funds directly toward your down-payment savings.
  • Explore co-buying options: Some Canadians purchase with family or friends to split both the down-payment and ongoing mortgage costs.

Difference Between A Deposit And A Down-Payment

A down-payment is paid on the closing day of the home purchase. However, the deposit is paid earlier along with the offer and has no standard required amount. Some buyers submit a deposit of 1-5% of the purchase price in an attempt to entice the seller to close quicker.

In a hot market, a deposit can grab a seller’s attention. They are typically provided by certified cheque, bank draft, or money order. A deposit usually becomes a part of your down-payment upon closing.

Why A Seller May Request A Deposit

A buyer may pre-emptively offer a deposit, however, a seller may also request or require a deposit. A seller typically requests a deposit because they only want to handle serious buyers. They want to ensure, as best as they can, that who they’re negotiating with has the financial security to close the sale.

How You Pay A Deposit To Buy A House In Canada

A deposit can work in a multitude of ways as they are not regulated in the same way that down-payments are.

When a seller accepts your offer, a deposit is typically paid within 24 hours, immediately upon acceptance, or within a certain number of business days. The deposit is held in trust by either the seller’s lawyer or your lawyer in a legally protected, interest-bearing account.

A deposit can be negotiated, as can aspects of a deposit, such as if it’s paid in cash or bank draft. Mortgage funds cannot be used for the deposit which means a buyer will have to use their own savings or borrow from a line of credit.

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How You May Lose Your Deposit

The key thing to remember about deposits in buying homes in Canada is that you can lose your deposit if you breach the purchase agreement without valid conditions. A seller is legally allowed to keep your deposit if you do not follow through with the legal contract you signed.

That said, if your offer stipulates conditions that are not met, such as a home inspection, your deposit is fully refundable.

If the conditions are not fulfilled and it’s the seller’s fault, the buyer’s deposit is most often refunded. It’s only when a buyer backs out unconditionally that the seller may claim the deposit or that a legal dispute may arise.

This is why it’s essential to work with a real estate lawyer and real estate agent to get the agreement of purchase and sale right.

Come prepared with the strongest deposit and down-payment you can manage, and always seek professional advice before finalizing your offer. Are you looking to purchase real estate in Toronto, Etobicoke, or the GTA?  Reach out to the experts at Adrian + Andrea at info@adrianandrea.com or call (416) 319-6893 for more information.