Gifted Down Payments in Canada: What Lenders Need to See

Many first-time buyers in the Lower Mainland get help from family with their down payment. A gift can make all the difference, but lenders and mortgage insurers have rules about who can give it, how it is documented and how the money is traced. Here is what to plan for, so the gift helps your application instead of holding it up.

The short version

Who can give you a down payment

• CMHC accepts a non-repayable financial gift from a relative as part of your down payment.
• Sagen looks for a close family or legal relationship, such as a parent, child, brother or sister, and a giver who has no financial interest in the home.
• Canada Guaranty accepts gifts from close family, including parents, children, siblings, grandparents and legal guardians.

Money from a friend, or with some insurers a more distant relative, is usually treated as a borrowed down payment instead. Insurers allow that in 2026, but with a 4.50% insurance premium at the highest loan-to-value, and any loan payments count in your debt ratios.

The gift letter

Your lender will tell you what it needs, and many have their own form. Sagen's and Canada Guaranty's guidelines ask for:

• The amount of the gift
• A statement that it doesn't have to be repaid
• The date of the gift
• The giver's name, address and relationship to you

A gift letter confirms that the money doesn't have to be repaid. If your family does expect repayment, the money is a loan, and your lender needs to know.

Showing where the money came from

Lenders verify the source of your down payment. Sagen's and Canada Guaranty's guidelines ask lenders for at least three months of account statements and an explanation of any large deposit, and Sagen expects the gift to be traced in the giver's or your account. Lenders and mortgage brokers have anti-money laundering duties of their own, and real estate licensees must verify their clients' identity and keep records of funds they receive.

• Have the gift transferred well before your offer, or as early as your lender suggests.
• Use a bank transfer or a cheque, not cash, so there is a clear record.
• Keep the statements that show the money leaving the giver's account and arriving in yours.

Gift or loan?

If the money has to be repaid, lenders treat it as debt, and the payments reduce what you can borrow. If your family wants something in return, such as a share of the home or repayment when it sells, the money isn't a gift for mortgage purposes. Tell your lender before you apply, and have a lawyer put the arrangement in writing. In Pecore v. Pecore (2007), the Supreme Court of Canada held that when a parent transfers something to an adult child for nothing, the law doesn't automatically treat it as a gift, so clear documents protect everyone.

Taxes

CRA doesn't treat most gifts as income, so a cash gift generally isn't taxable to you, although any income you earn on it is. Special rules can tax the giver on income from money given to a spouse or to a related child under 18. If someone gives you property other than cash, such as investments, that counts as a sale for them, and they may owe tax on any gain.

Using your FHSA and RRSP

• First Home Savings Account. Only you can contribute to your own FHSA, up to $8,000 a year and $40,000 in total. Family help comes to you first, and you contribute it within your own limits.
• Home Buyers' Plan. You can withdraw up to $60,000 from your own RRSPs. Contributions made in the 89 days before a withdrawal may not be deductible, so plan the timing with your advisor.

I go through both programs in First-Time Home Buyer Programs in BC.

If a parent goes on title instead

Some families choose to co-own instead of gifting. That has costs of its own:

• Property transfer tax. BC's first-time buyers' exemption only applies to the share owned by buyers who qualify. On an $835,000 home where one of two joint owners qualifies, the exemption is $4,000 instead of $8,000, leaving $10,700 of tax to pay.
• Federal home buyers' amount. Eligible buyers can share the $10,000 claim, but a co-owner who lived in a home owned by them or their spouse, in the year of purchase or the four years before, isn't eligible.
• Ownership. The parent becomes an owner on title, with all that means for the future. Talk to a lawyer about how to hold title before you sign.

Questions buyers often ask me

Can my parents give me my down payment?

Yes. A non-repayable gift from a close relative can make up part or all of your down payment. Expect to sign a gift letter and to show where the money came from.

What does a gift letter need to say?

The amount, that it doesn't have to be repaid, the date of the gift, and the giver's name, address and relationship to you. Your lender may have its own form.

How long does gifted money need to be in my account?

There is no single rule. Insurers such as Sagen and Canada Guaranty ask lenders to review at least three months of statements and to verify large deposits, so move the money early and ask your lender what it needs.

Is a gifted down payment taxable?

A cash gift generally isn't taxable income to you, but income you earn on it is. A gift of investments or other property can mean tax for the giver.

Can a friend give me money for my down payment?

Insurers accept gifts from family: Sagen and Canada Guaranty from close family, and CMHC from a relative. Money from others is generally treated as a borrowed down payment, which carries a higher insurance premium, and any repayments count in your debt ratios.

Getting ready to buy? Start with a mortgage pre-approval and see how much house you can afford.

This article is general information, not financial, tax or legal advice, and your lender and insurer make the final decision. For CMHC's requirements, see mortgage loan insurance requirements.