Table of Contents
With the average price of homes across Canada still uncomfortably high, it’s harder than ever for first-time home buyers to save enough money for a down payment. According to the Canadian Real Estate Association, the national average home price was $694,411 in November 2024. Assuming a minimum down payment of 6.4%, you’ll need $44,441. And if you don’t want to pay for mortgage insurance, you’ll need $138,882 cash for a 20% down payment.
It’s no surprise then, that a growing number of home buyers are relying on the Bank of Mom and Dad for help with the down payment. According to a recent survey from CIBC Capital Markets, over one-third of first-time home buyers get help from their family for a down payment. In Ontario and B.C., the most expensive markets in Canada, that number is even higher, with 36% of first-time buyers getting a boost. The average gift sits at $115,000; however, first-time buyers in Ontario get gifts averaging $128,000, while buyers in B.C. get a whopping $204,000. While only 12% of mover uppers rely on a gift, the average gift amount is $167,000.
If you’re in a position to get help from a family member, there are some rules you’ll need to follow. Here’s everything you need to know about gifted down payments for a mortgage in Canada.
Featured Partner Offers
1
nesto Inc.
Mortgage refinancing service
Yes
Mortgage rates
Lower than the national average
Days to close
10
2
Bank of Montreal (BMO)
Mortgage refinancing service
Yes
Mortgage rates
About the same as the national average
Days to close
18
Key Takeaways
- Typically, down payment gifts must come from immediate family members, such as parents or grandparents
- The money must be a gift with no expectation of repayment
- There are no limits on how much you can receive as a gift
- Your lender may require an official gift letter
What Is a Gifted Down Payment?
A gifted down payment is exactly that: a financial gift given by a family member to be used for a down payment for a house. Being a gift, there should be no expectation that you repay the money.
How Do Gifted Down Payments Work?
A family member can give you any amount of money towards a down payment. The key is that the funds must be a gift without any expectation of repayment. The person gifting the funds will need to sign a mortgage gift letter that details the relationship between the donor and recipient, the source of the funds and that the money is a gift and not a loan. Donors typically use savings or the proceeds from the sale of their own home as a source of funds, but borrowed funds (from a line of credit, for example) are also an option. Gifted down payments are not subject to any tax.
How Much Do I Need for a Down Payment?
When you purchase a home, you are required to make a down payment. The amount you need depends on the purchase price of the house. Under current rules, the minimum down payment is as follows:
| HOME COST | MINIMUM DOWN PAYMENT REQUIRED |
|---|---|
|
$500,000 or less
|
5%
|
|
$500,000 up to $1.5 million
|
5% on first $500,000, 10% on the remainder
|
|
$1.5 million or more
|
20%
|
If your down payment is less than 20%, you’ll need to get mortgage default insurance that covers your lender in case you can’t make your payments. Mortgage rates for insured mortgages are typically lower than uninsured mortgages as they are less risky for the lender.
However, as of December 15, 2024, the new minimum down payment cap increased to $1.5 million, meaning homebuyers will qualify for an insured mortgage up to that amount. This also means that home buyers will pay 5% on the first $500,000 and 10% on the difference up to $1.5 million, significantly less than the current 20% down payment requirement for homes costing over $1 million.
Who Can Give a Gifted Down Payment?
Typically, only immediate family members can gift you a down payment, which means parents, grandparents or siblings. Check with your mortgage lender to determine if gifts from other family members, such as aunts or uncles, are allowed.
Rules for Gifted Down Payments
The rules for a gifted down payment are fairly simple:
- The gifted funds must come from an immediate family member (check with your lender to see who is eligible)
- The funds must be a gift with no expectation of repayment
You’ll need to provide a gifted down payment letter signed by the donor and the recipient. Your lender will likely have their own letter template, but the details typically include:
- The donor’s name and relationship to the recipient
- The recipient’s name
- The total amount of money gifted
- A statement confirming that the money is a gift for a down payment and there is no expectation of repayment
- The property address
- Signatures by both parties
- The date of the transaction
- The letter may need to be notarized (check with your lender)
The lender will likely also need proof of funds, such as a bank statement, to confirm that the money has been deposited. The donor may also need to prove where the funds came from, such as savings or the sale of their home. This is to ensure transparency around the origin of the funds and to prevent money laundering.
Alternatives to a Gifted Down Payment
If you’re not able to secure a gift for a down payment, there are other options, including:
Home Buyer’s Plan (HBP): Withdraw up to $60,000 from your RRSP to use toward a down payment for your first home. You’ll have 15 years to repay the funds.
Learn more: Canada’s RRSP Home Buyers’ Plan
First Home Savings Account (FHSA): Save up to $40,000 ($8,000 per year) towards purchasing a home. Contributions are tax-deductible, and withdrawals are tax-free. Unlike the HBP, you do not need to repay the funds.
Related: First Home Savings Account (FHSA)
The Bottom Line
While a gifted down payment can help young buyers get into their first home, a mortgage is still a big responsibility. Even if you get help with the down payment, you’ll need to qualify for the loan based on your creditworthiness, income, and expenses, as well as prove that you can handle your mortgage payments.
Featured Partner Offers
1
nesto Inc.
Mortgage refinancing service
Yes
Mortgage rates
Lower than the national average
Days to close
10
2
Bank of Montreal (BMO)
Mortgage refinancing service
Yes
Mortgage rates
About the same as the national average
Days to close
18
Frequently Asked Questions (FAQs)
What is a gift letter for a mortgage, and do I need one?
Your lender may require you to provide a gift letter to confirm that the funds will not need to be repaid. There may be a standard template to fill out, or you can provide one with the required info.
Are gifted down payments taxed?
No. Gifted down payments are not taxable for the donor or the benefactor.
Can the donor use borrowed money for a gifted down payment?
Yes, The donor can use borrowed money, such as from a line of credit or reverse mortgage, for a gifted down payment.
How much of the down payment can be a gift?
There are no restrictions on how much down payment can be gifted. You must still qualify for the mortgage on your own, based on your income, credit score and debt-to-income ratio. You’ll also need to prove that you can cover closing costs, which are typically between 1.5% and 4% of the purchase price.
