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Who can gift money for mortgage down payment in Canada

Who can gift money for mortgage down payment in Canada

Getting help from family for buying your first home has become increasingly common in Canada. Last year, a large amount of Canadians (nearly 30%) received funds as gifts for their down payment from parents. 

The latest report by CIBC found that financial gifts have increased over time. The average gifted down payment increased to 58% from 2015 to 2020. 

Affordability has become a massive concern now with inflation and growing real estate. Due to that, first-time buyers in Canada face a struggle to buy a home on their own and are required to fork over some funds from parents or close relatives. 

What is a gifted mortgage down payment?

A gifted down payment is a non-taxed amount of funds that is gifted by a family member or close relative to cover the initial cost or a down payment for purchasing your home.

However, it’s crucial to know that these funds are not considered a loan. This money is paid with no expectation of repayment. That means the receiver is not legally obliged to pay back the gifted down payment. 

On the other hand, a person can receive a loan from a family member, but that money would be considered an investment for a family member, which will be taxed and would be subject to add to the total debt of the recipient, which can significantly impact their applicability of securing a home mortgage. 

Who is allowed to gift a mortgage down payment?

Anyone with a justified relation to a buyer is allowed the money as a gift towards  the down payment. In most cases, the gifter is a family member or close related. In some cases, even cousins are allowed to give a down payment as a gift.

But, lenders will want to know the relationship between the gifter and the giftee, as well as the context behind the gift. 

How much money can be gifted for a mortgage down payment?

There is no legal limit on gift money for a down payment in Canada. The individual can give as much money as a down payment to the recipient. Also, there’s no limit on the recipient’s end for receiving gift money for a down payment. 

However, in the majority of the cases, people put 10-20% of the potential cost of a house as a down payment in Canada. So, the individual can cover the complete down payment for the home buyer in Canada as a gift

Furthermore, the buyer would need to convince the lenders whether they can afford to handle the mortgage or not. That’s why for a self-employed buyer, the lenders may often ask the buyer to cover at least 5% of the down payment from his own finances. 

What is a mortgage gift letter?

A gift letter is an important document the home buyer must provide to the lenders. The mortgage gift letter consists of all the important information regarding the relationship between the home buyer and gifter, the amount and date of the transferred amount and acknowledgement of no repayment. Having this letter will help make the home-buying process go smoothly.

The purpose behind the mortgage gift letter is to convince the lender that you can fulfill the responsibility of future mortgage payments. 

Requirements for mortgage gift letter

  • The name, address and contact information of the gifter  
  • Relation between the recipient and the gifter 
  • The total amount of the gift in dollars 
  • The date gifted amount 
  • An explicit statement from the gifter that money is paid as a gift for the down payment and no repayment is expected
  • The signature of the gifter
  • New property address 

Is the gift money for the down payment taxed?

If you’re looking to help a loved one out with a down payment on a home, you’ll be happy to know that there is no gift tax in Canada for gifted down payment money. 

This means that regardless of how much you give, neither the gifter nor the recipient is required to pay taxes on this money. 

About The Author

Alp Perez is a Montreal based award winning real estate agent assisting home buyers and sellers in Montreal and surrounding areas. His real estate services include but not limited to: Price analysis based on the comparable listings sold in your area , Market Analysis for sellers and buyers, Recommendations on how to increase the value of your property , Customized Search engine marketing campaigns for each property, Negotiating on behalf of the buyer / seller depending on who he represents in the deal, Connecting buyers and sellers with his well known industry partners such as inspectors, mortgage brokers, notaries, land surveyors, renovators and etc. Whether you are A homeowner looking for the best real estate agent to get top $ for your property and sell your house or condo fast , A buyer looking for MLS agent Feel free to reach out to him at (514) 527-2022 or via his email :

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