Using a Gift From Parents for Your Down Payment in Ontario

Many Ontario buyers get help from parents or other relatives to reach a down payment. It can make the difference between buying now and waiting, but it raises practical questions about paperwork, lenders, and who owns what.

This article explains the general picture. The details depend on your lender and your family's situation, so a lawyer can help you confirm how to document the gift.

Can a gift count toward your down payment?

Yes, in many cases. For CMHC homeowner mortgage loan insurance, traditional down payment sources include a non-repayable financial gift from a relative. The word non-repayable matters: money you are expected to pay back is a loan, not a gift.

Lenders set their own documentation requirements, and these can differ from one lender to the next. Ask your lender or mortgage broker exactly what they need, and get the requirements in writing before you move any money.

How much down payment do you need?

Federal guidance sets minimum down payments based on the price of the home.

With less than 20% down, you will typically need mortgage loan insurance. For CMHC homeowner mortgage loan insurance, the purchase price must be below $1,500,000.

Remember that your deposit is separate from the gift paperwork. In a real estate deal, the deposit is normally held by the brokerage in a real estate statutory trust account, and it can be released only with a mutual consent or release signed by all parties, or under a court order.

Do your parents gain any ownership?

Whether a gift affects ownership depends on your situation, so it is worth confirming with a lawyer. Ownership depends on who is on title and what is agreed. If your parents do go on title, co-owners hold either as joint tenants or as tenants-in-common, and co-owners may agree to unequal shares.

The difference matters on death. When a joint tenant dies, the surviving co-owners inherit the deceased's share, while a tenant-in-common's share becomes part of the deceased's estate. If your parents want a stake, or you want to be clear they have none, put it in writing and get legal advice.

A gift of money is different from a parent selling or transferring you a property below market value. Ontario land transfer tax is charged on the value of the consideration, which is not limited to the price in the agreement and can include the value of any liability assumed, such as a mortgage, and any benefit conferred. For income tax, when someone sells or gifts property to a relative for less than fair market value, the seller is deemed to have received proceeds equal to fair market value. A lawyer or accountant can confirm how this applies to your situation.

Gifts, relationships and the family home

If you are married and later separate, the full value of the family home must generally be shared, even if one spouse owned it before the marriage or received it as a gift or inheritance, unless the spouses agree otherwise. Spouses can set their own terms in a marriage contract, signed by both in front of a witness.

Common-law partners are not required to divide property acquired during the relationship under Ontario's equalization rules. A partner who contributed to the other's property may need to go to court to recover that contribution, and a cohabitation agreement can set property terms. If family money is going in, think about these rules before closing, not after.

Other ways to build the down payment

• First Home Savings Account: room is $8,000 in the year you open your first account, with a lifetime limit of $40,000.
• A qualifying FHSA withdrawal is tax-free and does not have to be repaid, if all conditions are met.
• The FHSA and the RRSP Home Buyers' Plan can be used together for the same qualifying home, if you meet all conditions at the time of each withdrawal.
• The Home Buyers' Plan withdrawal limit is currently $60,000, repaid to your RRSP over up to 15 years.

To open an FHSA you must be a resident of Canada, at least 18 (19 where that is the age of majority), and 71 or younger on December 31 of the year you open it, and you must be a first-time home buyer. If you have a spouse or common-law partner, you also must not have lived in a home they owned or jointly owned as your principal residence in the same window. If you miss a minimum Home Buyers' Plan repayment, the shortfall is added to your income.

Ontario also offers a first-time homebuyer land transfer tax refund of up to $4,000. The buyer must be at least 18, must never have owned an eligible home anywhere in the world, and must occupy the home as their principal residence within nine months, and the refund must be claimed within 18 months after registration. For agreements signed after November 14, 2016, the refund is limited to Canadian citizens and permanent residents, although a buyer who is neither at closing has 18 months after registration to become one and then apply. If the buyer's spouse owned an eligible home while married to or in a spousal relationship with the buyer, neither spouse qualifies.

What to do next

• Ask your lender what gift documentation it requires before you transfer any money.
• Decide with your family whether the money is a gift or a loan, and write it down.
• Move the funds early so they appear in your account history.
• Decide whether anyone other than the buyer will go on title.
• Have a lawyer review the documents before closing.

Frequently asked questions