The Bank of Mom and Dad: How Gifted Down Payments Actually Work

A gifted down payment is money a family member gives you, with no expectation of repayment, that your lender accepts as part or all of your down payment. There is no tax on the gift in Canada, most lenders only accept gifts from immediate family, and the whole thing runs on one short document called a gift letter plus a clean paper trail. That is the short answer. The longer answer, which is worth ten minutes if your family is considering this, is about what the rules let a gift do, and the places where families get tripped up.

Working out what a gift plus your savings actually buys? Search current listings and see where the budget lands.

This is now a mainstream way to buy

CIBC Economics has been tracking family gifting for years, and their research found that roughly 31 per cent of Canadian first time buyers received family help, up from about 20 per cent in 2015, with the average gift in Ontario around $128,000. Among move up buyers, about 12 per cent got help, and the Ontario average there was higher still. Whatever you think of it, the Bank of Mom and Dad is one of the larger lenders in the country.

What lenders actually need

The gift letter is standard at every bank and most lenders will hand you their template. It states who is giving the money, their relationship to you, the amount, and the key sentence: the funds are a gift and do not have to be repaid. Both sides sign it. Lenders also want to see the money land, so expect to show the deposit into your account, and often 90 days of account history for your own savings. If the gift arrives from overseas, allow extra time and keep every record of the transfer, because anti money laundering rules require lenders to trace where down payment funds came from.

Two things lenders will not accept quietly. A gift that is actually a loan, because an undisclosed repayment obligation changes your debt picture and misstating it is mortgage fraud. And a gift from someone outside the immediate family, which some lenders allow with extra scrutiny and some simply decline. Parents, grandparents and siblings are the safe zone.

The 2026 rules that shape the math

As of August 2026, the minimum down payment in Canada is 5 per cent of the first $500,000 of the price and 10 per cent of the portion above that, up to the $1.5 million cap for insured mortgages. At $1.5 million and above you need 20 per cent down. If you put down less than 20 per cent, you pay mortgage default insurance, and the premium falls as your down payment rises: roughly 4.0 per cent of the loan at the minimum, 3.1 per cent with 10 per cent down, 2.8 per cent with 15 per cent down, and it disappears entirely at 20 per cent. Gifted funds from immediate family count as a traditional down payment source for insurance purposes, so a gift gets the same premium table as your own savings. You also still need to pass the stress test, qualifying at the greater of your contract rate plus 2 per cent or 5.25 per cent, unchanged per OSFI as of January 2026.

Sorting out your down payment? These will help:

• Deposit vs Down Payment in 2026: The Numbers Worked Through
• FHSA, RRSP or TFSA: Where Should Your Down Payment Savings Live?
• How Much Money Do You Need to Buy a Home in Etobicoke in 2026?

A worked example

Say you are buying a $650,000 condo. The minimum down payment is $40,000, which is 5 per cent of the first $500,000 plus 10 per cent of the remaining $150,000. Here is what a $60,000 family gift changes, using an illustrative 4.5 per cent five year rate and a 25 year amortization. Your rate will differ, the shape of the math will not.

The gift saves about $384 a month, trims $9,000 off the insurance premium, and roughly $69,000 off the debt. In finance terms the gift is deleveraging, which just means you owe less against the same asset, so every month costs less and you are less exposed if prices move against you. It also makes qualifying easier, because the stress test is applied to a smaller loan.

Where families get tripped up

The common stumbles are avoidable. Money arriving the week of closing, when the lender wanted it documented weeks earlier. A parent draining an investment account without checking the tax bill on the way out, since selling investments to fund a gift can trigger capital gains for the giver even though the gift itself is tax free. A gift quietly understood to be a loan. And the one nobody likes talking about: if the recipient later separates from a spouse, a gift that went into a matrimonial home is generally shared, not protected. Some families use a formal loan registered against the property instead, precisely for that reason. We are realtors, not lawyers or accountants, so on the family law and tax pieces, spend the few hundred dollars and get real advice before the money moves.

Making the gift work harder

If the timeline allows, route the gift through the buyer's registered accounts first. A First Home Savings Account takes $8,000 a year to a $40,000 lifetime maximum, and contributions are tax deductible for the buyer, so a gift parked there before the purchase generates a refund on top of the down payment. The RRSP Home Buyers' Plan allows up to $60,000 to be withdrawn per person for a first home, with a repayment schedule. A couple using both, funded partly by family, can put serious tax advantaged money to work. The trade off is time, since some of these moves need contribution room and holding periods, so this is a strategy for buyers planning a year ahead, not closing next month.

The counterpoints

Two things worth saying plainly. First, at the market level, widespread gifting adds buying power, and CIBC's economists have noted it likely supports prices, which is cold comfort for buyers without family help. Second, at the family level, a gift is real money leaving a retirement plan, and the giver's own advisor should sign off before anyone signs a gift letter. What would change the math in this post: a premium schedule change from the insurers, a move in the stress test floor, or the kind of rate drop that shrinks the monthly gap between the two columns above. Figures are current as of August 13, 2026.

Buying with family help and want the plan tightened up before you offer? Reach out. We will connect you with mortgage people who handle gifts every week.

Dave Dubbin
Real Estate Expert
Dave Dubbin & Associates
Real Estate Broker for Etobicoke and Toronto