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Summary: A gifted down payment is money a close family member gives you, with no expectation of repayment, to put toward buying a home. Lenders require a signed gift letter confirming it is a true gift, and the funds usually need to sit in your account before closing so their source can be verified.
Many first-time buyers in Ontario reach their down payment with help from a parent or grandparent, and lenders are comfortable with that as long as it is documented properly. The two things that matter most are proving the money is a gift rather than a loan, and showing where it came from.
What is a gifted down payment?
A gifted down payment is a sum given to you by an immediate family member specifically to help buy a home, with no requirement to pay it back. Because it is a gift and not a debt, it does not count against you when the lender assesses what you can afford.
The distinction between a gift and a loan is the whole point. A loan adds a monthly obligation and can reduce how much mortgage you qualify for; a true gift does not. Lenders confirm which one it is through the gift letter, so the wording has to be clear that no repayment is expected.
What is a gift letter and what must it say?
A gift letter is a short signed statement from the person giving the money, confirming the gift is genuine. Your lender will not release the mortgage without it, and most use a standard template. A complete gift letter names:
The donor and their relationship to you. Lenders generally accept gifts only from immediate family (parent, grandparent, sibling, spouse).
The exact dollar amount of the gift.
A clear statement that it is a gift with no expectation of repayment and no interest.
The property address the gift is being applied to.
Confirmation the funds are the donor's own money, not borrowed on your behalf.
The donor's signature and the date.
How does a gifted down payment work at closing?
The money needs to move from the donor to you, and then to your lawyer's trust account, with a clear paper trail at each step. Starting early avoids a last-minute scramble before closing.
The donor signs the gift letter and provides it to you and your mortgage broker or lender.
The donor transfers the funds to you, ideally by traceable bank transfer rather than cash.
The money sits in your account, usually for a short period, so it appears on your statements ahead of closing.
Your lender and lawyer verify the source of the funds against your statements and the gift letter.
You send the funds to your lawyer's trust account, where they are combined with your mortgage advance and applied on closing day.
Who can gift a down payment, and can it be a loan?
Most lenders accept a gifted down payment only from an immediate relative, and it must be a genuine gift. Money that has to be repaid is treated as a loan, which changes how the lender qualifies you.
Gift | Loan from family | |
Repayment | None | Required |
Gift letter | Yes, signed | Not applicable |
Effect on mortgage qualifying | None | Counts as a debt |
Lender acceptance | Widely accepted from immediate family | Often restricted or disallowed |
If a relative wants their money back over time, that is a loan, and you should tell your mortgage broker up front. Trying to present a loan as a gift can jeopardize your financing.
What proof do lenders and your lawyer need?
Beyond the gift letter, both your lender and your lawyer confirm where the money came from. Lawyers are required to verify the source of funds under Canada's anti-money-laundering rules, so expect to provide documentation.
Recent bank statements showing the gift arriving in your account, typically covering about 90 days.
The signed gift letter from the donor.
Proof of the donor's funds, such as a statement showing the money leaving their account.
Government-issued identification for you, and sometimes for the donor.
The minimum down payment itself still follows the usual rules: 5% on the first $500,000 of the price and 10% on the portion between $500,000 and $1,500,000. A gift can cover some or all of that amount. For the wider budgeting picture, see our complete guide for first-time home buyers in Ontario.
Frequently asked questions
Do I have to pay tax on a gifted down payment?
No. Canada has no gift tax, so receiving money from a family member to buy a home is not taxable income to you, and the donor does not pay tax on giving it. Keep the documentation in case questions come up later.
Can the down payment gift come from a friend?
Usually not. Most lenders restrict gifted down payments to immediate family. A gift from a friend or more distant relative is often declined, so confirm your lender's policy before counting on those funds.
How long does the gift money need to be in my account?
There is no single rule, but lenders and lawyers like to see the funds in your account and reflected on your statements ahead of closing, often around 90 days. Depositing a large sum days before closing can trigger extra source-of-funds questions.
Does a gifted down payment affect my mortgage approval?
Positively, if documented. Because a true gift is not repaid, it does not add debt or reduce your borrowing room. The gift letter is what lets the lender treat it as a gift rather than a loan.
What if my parents want to be on title in exchange?
That is a separate decision with legal and tax consequences, including how you hold title and potential effects on rebates. Raise it with your lawyer early, because adding an owner changes the transaction and any first-time buyer rebate eligibility.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus entirely on Ontario residential real estate law. We help buyers and sellers with purchase closings, refinances, sales, and status certificate reviews, combining a simple digital platform with a licensed in-house legal team you can reach by chat, email, or video call. If a gift is helping fund your purchase, you can start your closing online or get in touch with any questions.
Legal references: Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
