Is escrow common in Canada?

The exact term is used less often than in the United States. Canadians more commonly deal with trust accounts and lender holdbacks, which serve the same purpose of holding funds until conditions are satisfied.

Who holds my deposit in a Canadian home purchase?

Your deposit is usually held in trust by the listing brokerage or a lawyer, not handed directly to the seller. It is applied to the purchase price on closing.

What is a mortgage holdback?

A holdback is when a lender withholds part of the mortgage advance until a condition, such as completing repairs or new construction work, is satisfied. It is a form of escrow on the financing side.

Mortgage Glossary

What is Escrow?

Escrow is an arrangement where money or documents are held by a neutral third party until the agreed-upon conditions of a deal are satisfied. In Canadian real estate, deposits are often held in a lawyer's or brokerage's trust account, and lenders may hold back funds until certain obligations are completed.

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Quick answer

Also known as: escrow account, in trust, holdback

Key points

Escrow means funds or documents are held by a neutral third party until conditions are met.
In Canada, deposits are usually held in a brokerage or lawyer's trust account.
A lender holdback is a related concept, where part of an advance is withheld until work is finished.
Escrow protects both buyer and seller from one side failing to perform.
Held deposits are typically credited toward the purchase price at closing.

Escrow explained

Escrow describes a situation in which a trusted intermediary safeguards funds, documents, or property on behalf of two parties to a transaction. The money is not released until specific, pre-agreed conditions are met, which protects both the buyer and the seller from non-performance.

The term is used more loosely in Canada than in the United States. Canadians more commonly encounter trust accounts and holdbacks. A buyer's deposit sits in a brokerage or lawyer's trust account until closing, and a lender may hold back a portion of mortgage advances until a deficiency, such as incomplete work, is resolved.

What a Escrow is for

Escrow exists to reduce risk in transactions where the two parties may not fully trust each other. By placing money with a neutral holder, neither side can run off with the funds before its side of the bargain is complete, which keeps deals fair and orderly.

How it can help you

Understanding escrow helps you know where your deposit goes and when it is released, so you are not surprised by holdbacks at closing. Knowing the rules also helps you compare lenders, and Lenderoo lets you shop 40+ lenders for free to find terms that suit how you want your funds handled.

When it comes up

A buyer puts down a deposit when their offer is accepted. Rather than handing it directly to the seller, the deposit is held in trust until closing, where it is applied to the purchase price. If the seller fails to deliver clear title, the held funds can be returned to the buyer.

Example: deposit held in trust

You buy a home for $500,000 and provide a $20,000 deposit when your offer is accepted. The deposit is held in the listing brokerage's trust account, not paid to the seller.

On closing day, the $20,000 is credited toward your purchase price, leaving $480,000 to be covered by your mortgage and remaining down payment. If the deal had collapsed because the seller could not deliver clear title, the trust account would return your deposit.

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Questions & answers

Escrow: frequently asked questions

Common questions Canadians ask about escrow.

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Related mortgage terms

Closing Costs

Fees and expenses paid when finalizing a real estate transaction

Read definition

Down Payment

The upfront cash payment made when purchasing a home

Read definition

Title

The legal record of who owns a property and any claims or charges registered against it.

Read definition

Lender

A financial institution or company that provides the money for a mortgage.

Read definition

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Mortgage Glossary

What is Escrow?

Find my best mortgage Back to glossary

Quick answer

Also known as: escrow account, in trust, holdback

Key points

Escrow means funds or documents are held by a neutral third party until conditions are met.
In Canada, deposits are usually held in a brokerage or lawyer's trust account.
A lender holdback is a related concept, where part of an advance is withheld until work is finished.
Escrow protects both buyer and seller from one side failing to perform.
Held deposits are typically credited toward the purchase price at closing.

Escrow explained

What a Escrow is for

How it can help you

When it comes up

Example: deposit held in trust

You buy a home for $500,000 and provide a $20,000 deposit when your offer is accepted. The deposit is held in the listing brokerage's trust account, not paid to the seller.

Have a question about escrow?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Escrow: frequently asked questions

Common questions Canadians ask about escrow.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary