A gifted down payment is money given to a homebuyer by a family member — typically a parent — to help cover the minimum down payment on a home purchase. In Ontario, using a gifted down payment is entirely legal and accepted by all major mortgage lenders, provided the funds are properly documented. If someone is helping you buy a home, here's what you need to know before your mortgage application.
What Is a Gifted Down Payment?
A gifted down payment is funds provided to a buyer by another person, typically a close family member, with no expectation of repayment. The critical distinction for Canadian mortgage lenders is that the money must truly be a gift — not a loan in disguise. If the donor expects the money back, even informally, lenders treat it as a liability, which affects your debt ratios and borrowing capacity.
Under guidelines from CMHC and major lenders, gifted down payment funds are accepted for insured mortgages (purchases with less than 20% down) from immediate family only. "Immediate family" for most lenders means:
- Parents or step-parents
- Grandparents
- Siblings
- Spouse or common-law partner
Gifts from friends, employers, or non-related third parties are not accepted for insured mortgages in Canada. For conventional mortgages (20% or more down), some lenders may have more flexibility, but this is lender-specific.
What Documentation Do You Need for a Gifted Down Payment?
Using a gifted down payment requires specific documentation. Your lender will request:
Gift Letter
A signed letter from the donor confirming:
- The exact dollar amount being gifted
- The donor's relationship to the buyer
- A clear statement that the funds are a gift and no repayment is required or expected
- The property address (if known at time of gift)
- The donor's signature and date
Most lenders provide a standard gift letter template. Ask your mortgage broker for the specific form your lender uses — submitting an informal letter may not satisfy underwriting requirements.
Bank Statements
Lenders typically require:
- The buyer's bank statement showing the gift deposit in their account
- In some cases, the donor's bank statement showing the funds leaving their account
- 90-day bank history for the buyer so underwriters can see where all large deposits originated
Can I Buy a Home With Only a Gifted Down Payment?
Yes — you can buy a home in Ontario using 100% gifted funds for the down payment, as long as the gift comes from an eligible donor (immediate family), the gift letter is properly completed, and the funds are documented. The minimum down payment rules still apply based on purchase price:
| Purchase Price | Minimum Down Payment | Source Can Be 100% Gifted? |
|---|---|---|
| Under $500,000 | 5% | Yes |
| $500,000–$999,999 | 5% on first $500K + 10% on balance | Yes |
| $1,000,000+ | 20% | Yes (conventional mortgage only) |
Some lenders may require that buyers contribute at least some of their own funds — particularly for high-ratio mortgages. Not all lenders accept 100% gifted down payments even when the documentation is in order. Confirm your lender's policy with your mortgage broker before you rely entirely on gifted funds.
When Should the Gift Arrive in Your Account?
The gift should be in your bank account well before your mortgage application is submitted — ideally 30 to 90 days in advance. Lenders review 90 days of bank history and flag any large unverified deposits. If the gift arrives the day before you apply, underwriting will ask for a full explanation and documentation chain. Getting the funds deposited early avoids delays.
If the gift arrives close to the closing date, you'll need to provide the gift letter, both parties' bank statements, and a clear transfer trail. This isn't impossible, but it requires thorough documentation and may slow the approval process.
Does a Gifted Down Payment Affect My Mortgage Rate or Qualification?
A properly documented gifted down payment does not affect your mortgage rate. Lenders care about source documentation, not the origin of the funds. A gift that's well-documented is treated the same as savings from your own account.
However, a gifted down payment does affect qualification indirectly — in a positive way. A larger down payment reduces the amount you borrow, which lowers your monthly payments and may reduce or eliminate CMHC mortgage insurance. On a $600,000 GTA purchase, moving from 5% down ($30,000) to 10% down ($60,000) can save thousands in insurance premiums added to your mortgage.
Gifted Down Payment vs. Down Payment Loan From Family
Not everyone in the family will agree to give money outright — sometimes parents prefer to help as a loan. The distinction matters enormously to your mortgage lender. A loan, even from family, is a debt. That debt appears in your debt service ratio calculations (GDS and TDS), reducing the mortgage you qualify for. A gift does not.
If your family wants to structure it as a loan but you need it treated as a gift for mortgage qualification, be aware that misrepresenting a loan as a gift to a lender is considered mortgage fraud — a serious legal issue. Discuss your situation openly with your mortgage broker to find the best approach.
For a full breakdown of how parental help works, read our guide on whether parents can help with a down payment. To understand how gifted funds fit into your overall down payment plan, see how much down payment you need in the GTA.
FAQ
Does a gifted down payment count as income?
No. Gifted funds are not considered taxable income in Canada. There's no gift tax, and you don't need to report a gift on your tax return. The person giving the gift also has no reporting obligation, though they may have capital gains to report if the funds came from selling an asset.
Can a friend gift me money for a down payment in Ontario?
For insured mortgages (less than 20% down), no — CMHC and most lenders only accept gifts from immediate family members (parents, grandparents, siblings, spouse/common-law partner). For conventional mortgages with 20% or more down, some lenders may accept gifts from non-family members, but this is lender-specific. Ask your mortgage broker about your lender's policy.
What if the gift is in cash?
Cash gifts are problematic because they can't be traced through a bank statement. Lenders need a clear paper trail showing funds were received and came from a legitimate source. Any large cash deposit will raise questions during underwriting. The safest approach is an electronic transfer that creates a clear record.
Do I need a lawyer to accept a gifted down payment?
No — a lawyer is not required to accept a gift for a down payment. Your real estate lawyer will handle the closing, but the gift itself is simply a bank transfer accompanied by a gift letter. Some families with large gifts ($100,000+) may want independent legal advice to formalize the arrangement, but it's not a standard requirement.
Can I use a gifted down payment and RRSP withdrawal together?
Yes. You can combine multiple sources of down payment funds — gifted amounts, your own savings, RRSP withdrawals under the Home Buyers' Plan, and FHSA withdrawals. Each source needs its own documentation. Your lender and mortgage broker will tell you exactly what's needed for each component.
Once you have your down payment sorted, the next step is getting pre-approved. Learn how to get mortgage pre-approval in Ontario, or see the complete steps to buying a home in the GTA.