Understanding Gifted Down Payments and the Deed of Gift in Ontario

Key Concepts

Apr 22

One of the questions I get asked all the time — especially by first-time buyers — is whether it’s okay to use money from a parent or relative for a down payment.

The short answer is: yes, you absolutely can. But lenders will want to see something called a Deed of Gift (also known as a gift letter), and it needs to be done right.

Let me break it down for you.

What Is a Gifted Down Payment?

A gifted down payment is money that a family member gives you to help buy a home. It’s most commonly given by parents to their children — but it can also come from siblings or grandparents.

In most cases, it’s a way to bridge the affordability gap in today’s high-priced market. And honestly, I’ve seen gifted funds make homeownership possible for a lot of people who otherwise would’ve had to wait years.

But just because it’s coming from family doesn’t mean lenders don’t care how it’s handled.

What Is a Deed of Gift?

A Deed of Gift or gift letter is a formal declaration that the money being used for the down payment is a gift — not a loan. This is super important.

Lenders need to confirm that:

The money is not expected to be repaid
It’s not tied to any conditions
It won’t become a liability after the mortgage is approved

The letter typically includes:

The name of the person giving the gift
The relationship to the borrower
The amount of the gift
A statement that it is non-repayable
Signatures from both parties

Some lenders even have their own version of this form, so make sure you’re working with someone who knows what each lender requires.

What Else Should You Know?

Here are a few things to keep in mind…

✅ The Money Must Be in Your Account Before Closing

Most lenders want to see the gift funds in your account at least 15 to 30 days before closing, along with a paper trail. Be prepared to show bank statements if requested.

✅ It Only Works With Immediate Family

Gifts from friends, coworkers, or distant relatives usually won’t qualify. The source needs to be verifiable, and most lenders require that the gift come from a parent, grandparent, or sibling.

✅ You Still Need to Qualify for the Mortgage

Even with a gifted down payment, you’ll still need to pass the mortgage stress test and meet income and credit requirements. The gift helps you with the down payment — not your debt service ratios.

Let’s Make It Easy

If you’re planning to use a gifted down payment, I’ll walk you through the process step-by-step. I’ll also make sure the gift letter meets your lender’s exact requirements — so you don’t hit any last-minute snags.

Whether you’re buying your first home or helping a family member into theirs, I’m here to guide you through it all.

📩 Thinking of using a gifted down payment? Let’s connect and go over your best options.

I’ll help you put the paperwork in place, find the right lender, and make the process smooth and stress-free.

Tashfin Awal