When buying a pre-construction property, many buyers confuse the deposit with the down payment—but they play very different roles in the process. Let’s clear up the confusion and take a detailed look at each:

Deposit

A Deposit is a series of scheduled payments made to the developer during the construction process, called the “deposit structure.” This is provided as “consideration” in contract law to create a legally binding agreement and shows commitment to the builder and secures your unit. It’s also how developers fund the build (typically pre-construction requires about 70% of the units to be sold in order to secure their construction financing.

Instead of a lump sum, deposits are typically broken into instalments, over several months or years according to the “deposit structure”. This varies significantly by project and the market — in Toronto, 15%-20% is standard whereas in Calgary, 10% down is the norm. Once your deposits are paid, you don’t put down any more money until final closing.

Here is a sample deposit structure:

$5,000 with the Agreement of Purchase & Sale
In 30 Days: Balance to 5%
In 90 Days: Another 5%
In 180 Days: Another 5%
At Final Occupancy: Another 5%

The deposit is only refundable if you cancel during your rescissionary or “cooling off period” or if another buyer condition isn’t met (e.g. a mortgage pre-approval). After this is met, your deal is firm and binding and you cannot simply get out of the deal.

Down-Payment

The down-payment is not related to the purchase of the unit, instead it relates to your mortgage. If you are buying an investment property, you must put down a minimum of 20% at closing to qualify for a mortgage (if you plan on living in the unit yourself as your principal residence, then you can qualify to put down as little as 5% but then you must get CHMC insurance). All of the deposits you provided to the builder count towards this requirement.

This means that if you put down a:

5% deposit→ you need an extra 15% at closing + closing costs
10% deposit→ you need an extra 10% at closing + closing costs
15% deposit→ you need an extra 5% at closing + closing costs
20% deposit→ you just need your closing costs

Understanding this structure is essential for planning your finances and avoiding surprises.

Example Scenario:

You buy a pre-construction condo in Calgary for $300,000 with a 10% deposit structure:

$5,000 on signing
In 30 Days: Balance to 5% ($10,000)
In 90 Days: Another 5% (15,000)

= $30,000 deposit until closing

At Closing you require a down-payment of 20% ($60,000) but you have already put down total deposits of $30,000, so you need an extra deposit of $30,000.

=$60,000 total down-payment (20%)

If you need any help understanding a deposit structure or mortgage requirements, book a call and I would be happy to help.