A lot of first-time buyers get help from family, and lenders are used to it. What catches people out isn't whether a gift is allowed. It's the paperwork and the timing, because the lender needs to see where every dollar came from before they fund the mortgage.
Family Helping With Your Purchase?
I will help you line up the gift, the deposit and the lender's paperwork so nothing holds up your closing
548 490 4577Who can give a gift?
Lenders and mortgage insurers generally accept gifts from immediate family: parents, grandparents and siblings, and sometimes others. Rules vary by lender and insurer, and a gift from a friend or a more distant relative often isn't accepted for an insured mortgage. Ask your lender or mortgage broker before any money moves.
What goes in a gift letter?
Your lender will give you its own form. It usually includes:
- The donor's name, address and relationship to you
- The amount of the gift
- A statement that it is a gift and doesn't have to be repaid
- The property address, if you have one
- Signatures from the donor and the buyer
If the money is really a loan, don't call it a gift. A loan is a debt that lenders count in your ratios, and describing it as a gift on a mortgage application is misrepresentation.
When does the money need to be in my account?
Most lenders want the gift deposited into your account before closing, often a couple of weeks ahead, with a statement showing it arrive. For the rest of your down payment, lenders typically ask for 90 days of account history, so unexplained large deposits get questions. Keep a record of every transfer. If the gift is also covering your deposit, it needs to be available within about 24 hours of an accepted offer, so move it before you start making offers.
How can parents protect a gift?
Parents giving a large gift sometimes worry about what happens if the relationship ends. In Ontario, a gift to one spouse from a third party can generally be excluded when property is divided on separation, but the matrimonial home is treated differently: a gift that goes into the home you live in together usually loses that protection. A marriage contract or cohabitation agreement prepared with a family lawyer is the usual way to protect it. This is a general summary, not legal advice.
Gift or co-signer?
Sometimes the better help isn't cash. A parent can co-sign the mortgage or go on title with you to help you qualify. That carries more risk for the parent, because they become responsible for the mortgage and it counts against their own borrowing. A parent on title can also reduce the Ontario land transfer tax refund, which only applies to the first-time buyer's share.
Frequently asked questions
Is a gifted down payment taxable in Canada?
No. Canada has no gift tax, and you don't report the gift as income. If the donor sells investments to fund it, they may owe capital gains tax on that sale.
Can I put a gift into my FHSA?
Yes, if you have contribution room. The gift goes to you first and you contribute it yourself, which gives you the tax deduction. A parent can't contribute to your FHSA in their own name.
Can a gift cover my closing costs?
Yes. Lenders want to see enough for closing costs, often about 1.5% of the price, and documented gifted money can count toward it.
