Coming up with a down payment is one of the biggest hurdles that Canadian homebuyers face, especially as home prices continue to rise. While the RRSP Home Buyers’ Plan and the First Home Savings Account (FHSA) can help you save money towards your downpayment, it may not be enough for buying your first home in today’s market. For many, help from parents or family members is the only way to enter the market. That’s why understanding the rules for gifted down payments in Canada is so important.

Gifted down payments can make homeownership possible sooner, but there are specific requirements you’ll need to follow to satisfy your lender and avoid delays. From signed gift letters to proof of funds, here’s what you need to know to ensure your gifted down payment is accepted without issues.

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Key Takeaways

• Gifts are common: About 31% of first-time buyers get family help, with average gifts over $115,000.
• Paperwork matters: You need a gift letter, proof of funds, and transfer records.
• Protect the gift: Use a contract or lien to keep it separate if your relationship ends

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What Is a Gifted Down Payment?

A gifted down payment is money given by an immediate family member to help you cover your down payment when buying a home in Canada. Unlike a loan, this money does not have to be repaid, and it must be properly documented so that your lender can verify it’s truly a gift.

This type of support has become much more common as home prices have risen faster than incomes. According to updated research by CIBC Capital Markets, which examined the real estate market during the pandemic, the average gifted down payment across Canada reached $82,000, nearly double the amount in 2015. More recent updates show this trend has continued even as home sales have cooled off. While larger down payments can ease the pressure of high prices for buyers, they also contribute to Canada’s widening wealth gap, since not every family can afford to provide this kind of financial boost.

Today, about 31% of first-time buyers rely on money from family to help with their down payment, compared to only 20% in 2015. The average gift amount has climbed to $115,000 nationwide, which is 73% higher than pre-pandemic levels. In British Columbia and Ontario, where affordability challenges are the highest, the numbers are even more striking. For example, first-time buyers in BC now receive an average gift of $204,000, while those in Ontario typically get around $128,000 to help them compete in the housing market.

People who are upgrading to larger homes, sometimes referred to as mover-uppers, are also receiving gifts. In that group, approximately 12% receive financial assistance, with an average gift of $167,000 nationally and over $230,000 in BC. Even though home prices have declined from their peak in 2021, gifts have continued to grow. Many parents are selling their own homes at high values and passing some of that wealth along to their children, effectively circumventing probate taxes and seeing their children enjoy homeownership during their parents’ lifetime.

Who Can Give a Gifted Down Payment?

Most mortgage lenders in Canada only accept down payment gifts from immediate (next of kin) family members, including:

• Parents and step-parents
• Grandparents
• Siblings

Some lenders may consider gifted down payments from extended family (like aunts or uncles) if you can document your relationship, but it’s less common. Gifts from friends or unrelated individuals are generally not accepted; if they are, you may need to provide additional proof and obtain approval from the lender. If you’re planning to receive a gift from someone who isn’t a direct relative, talk to your lender early to confirm eligibility. Additionally, plan to have the money gifted to show the source of funds in your name at least 90 days before your purchase date.

Minimum Down Payment Rules in Canada

Even when you use gifted funds, you still have to meet Canada’s minimum down payment requirements:

• 5% on the first $500,000 of the purchase price
• 10% on the portion between $500,000 and $1,499,999
• 20% on homes priced at $1.5 million or more
  

For example, if you purchase a $750,000 property, your minimum down payment would be $ 50,000.

Remember, if your down payment is less than 20%, you must purchase mortgage default insurance (such as CMHC); typically, these high-ratio mortgages come with the lowest mortgage rates in Canada. The source of funds does not impact your insurance premium, but you still need to document the gift clearly. Closing costs cannot be gifted and must be covered by your sources. So, if your family is helping you with the closing costs as well, then ensure that they are gifted to you more than 90 days before your purchase date.

How to Document a Gifted Down Payment

Proper documentation is crucial to prove that the money is a true gift and not a loan. Without the correct paperwork, your lender may decline your application or reduce your borrowing capacity. Here’s a look at what you need to confirm for your lender and how:

Gifted Down Payment Documentation Checklist

Requirement	Details
Gift Letter	Signed by donor, stating no repayment is expected. Must include donor/recipient names, relationship, amount, and date.  Most lenders have their own gift letter template. Ask your mortgage lender or broker to ensure you use the correct form. Here is a sample gift letter from nesto.
Proof of Funds (Donor)	The recent bank statement indicates that the donor had the necessary funds available.
Proof of Transfer	A bank statement or wire transfer slip, or a copy of the deposited cheque, showing that the money was sent to your account.
Timing Evidence	Confirm funds were deposited before the lender’s cut-off (often 15–90 days before closing).

Timing and Transfer of Funds

Timing is key; for this reason, banks, financial institutions and lenders prefer to see the gifted funds in your account at least 15–30 days before closing. However, it’s best to check with your lender, as different rules may apply if your donor is gifting 20% or more of the down payment. However, if you qualify with less than 20%, then the more straightforward default insurer rules would apply, likely saving you interest on borrowing costs over your mortgage term.

When your donor is a foreign resident and the funds originate from outside Canada or are gifted by someone not considered an immediate (next of kin) family member, the money may need to be in your account 90 days in advance to meet anti–money laundering requirements.

Allow extra time for wire transfers and currency conversion, and keep all records of the transaction. When money is coming from outside Canada or from non-immediate family, ask your donor to provide a 90-day prior history of their bank account, confirming that the funds were present in their name. Additionally, they should provide you with a copy of the wire transfer instructions. Then, you’ll include supporting documents for your lender, such as a confirmation of deposit (an incoming wire transfer receipt) and a bank statement showing the funds in your bank account.

Tax Implications of Gifted Down Payments

In Canada, gifted down payments are not subject to tax. Neither you nor your donor has to pay tax just because the money was gifted.

• The donor may be liable for tax on any interest income or capital gains earned before the gift.
• If the property generates rental income*, you’ll pay tax on that income as usual.

When in doubt, consult a tax specialist or your real estate legal professional to clarify any additional tax considerations. 

*Rental income can be earned and used to qualify for your mortgage if you purchase an owner-occupied rental with more than one unit, where one is occupied as your primary residence and a separate attached unit is rented out.

Protecting a Gifted Down Payment

If you’re married or in a common-law relationship, it’s wise to think about how to protect a gifted down payment. Some buyers ask a lawyer to draft a cohabitation agreement or marriage contract that clearly states the gifted down payment will remain the recipient’s separate property (ownership). 

In most provinces, this type of agreement can override default property-sharing rules and help ensure the money isn’t divided if you separate. In Quebec, the law still requires the value of the family home itself to be shared equally at divorce. However, gifts or inheritances are generally excluded by law if you can prove the money was intended for one spouse only.

In some cases, your family or donor may instead request that a promissory note, loan agreement or registered lien (such as a second mortgage or hypothec in Quebec) be placed on the property title. This creates a legal claim that requires the gifted funds to be repaid if the home is sold or if the relationship breaks down. Keep in mind that if a lien or mortgage is used, the funds are not legally a gift but rather a secured loan. Your mortgage lender must approve this type of arrangement, and it must be clearly documented from the start.

While these steps can feel awkward, they are often the most effective ways to prevent disputes later and ensure the money is used and returned as intended, in case your relationship ends. However, you should always seek professional legal advice before entering into any contract or agreement related to homeownership.

Common Gifted Down Payment Mistakes to Avoid

Although gifted down payments are common, some mistakes can cause headaches for both borrowers and lenders. Planning can help avoid last-minute issues and protect everyone involved. 

Here are some examples of mistakes that borrowers receiving gifted down payments should avoid:

• Multiple deposits: Request that the donor send the full amount in a single transaction, as multiple deposits can complicate the documentation of the source of funds.
• Borrowed gifts: If the donor took out a loan to make the gift, lenders may not accept it as a gift.
• Late transfers: Funds arriving right before closing can derail your mortgage approval.
• No legal protection: Without an agreement or lien on the property title, your gifted funds could be divided if you separate from your partner/spouse.
  

Frequently Asked Questions (FAQ) About Gifted Down Payments in Canada

Final Thoughts

Gifted down payments can be a way to overcome the affordability barriers of homeownership and buy a home sooner. Just remember that lenders expect clear records, early deposits, and proper legal paperwork to verify your funds.

If you’re considering using a gifted down payment, connect with a nesto mortgage expert to get tailored advice, compare options, and plan a mortgage strategy that supports your long-term goals. Whether you’re deciding between mortgage financing options or just looking to understand how much money you’ll need for your down payment to make your homeownership goal a reality.

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Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned, salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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