The deposit and down payment are the same money, just paid at different times during the purchase process.
In Canada, the most common way to purchase real estate is by way of a mortgage. A mortgage is not a “simple” loan, it’s more of an investment by the lender secured in the tangible asset of your property. No money down and zero down payment loans are against Canada’s mortgage lending rules. To qualify for a mortgage, you will be asked to “put down” money up front; this could be as little as 5% or much more depending on your situation and qualifications.
Alternatively, you could still purchase a property with no money down if you had a large secured or unsecured line of credit, and didn’t require a typical mortgage. The rules wouldn’t apply. In most cases when you make an offer to purchase a home you would not be putting up any money if you have conditions or subjects in your offer. Once your offer is “firm”, meaning the conditions have been removed, you would then need to make your “deposit”. The deposit, in essence, is a portion of your “down payment”.
In our local market, for most residential resale real estate transactions the deposit would be 5%. This is the amount recommend by our local real estate authorities, but this amount can be negotiated. If, for example, the buyers don’t have easy access to funds – maybe they are tied up in RRSP’s – it’s not abnormal to see a deposit of less than 5%, but I have rarely seen a deposit below $5,000.
If the purchase has a long closing date the sellers may require a deposit greater than 5%, which is often the case for new builds where the closing would be planned two or three years in advance. The developer will most likely require a 20% deposit paid at intervals up until the completion of the build.
In the case where you have paid a larger deposit than your intended down payment – for example, a new building where a first time buyer is intending to purchase with 5%, and the developers are refusing to negotiate the deposit – they would have to arrange a way to borrow the 20% and at closing the excess deposit would be paid back to the buyer.
In more typical home purchases, the deposit is paid into trust with the buyer’s realtor’s office, and settled as a portion of the down payment when the lawyer or notary processes the closing and title transfer.