Down Payment Gift Letter

A down payment gift letter is a signed, written statement from an immediate family member confirming that funds provided toward a property purchase are a true gift—not a loan—and do not need to be repaid. Mortgage lenders in Canada require this letter (along with proof the funds were deposited, often 30+ days (as of 2026-07-27 — verify current) before closing) when any portion of the down payment comes from a gift. The Financial Consumer Agency of Canada (FCAC) and Canada Mortgage and Housing Corporation (CMHC) provide guidance on acceptable gift documentation for insured and uninsured mortgages. Verify specific lender requirements with your mortgage lender or a BC mortgage broker.

Most Canadian lenders accept gifts only from immediate family members (typically parents, grandparents, siblings, or spouse/common-law partner), though exact definitions vary by lender. Some lenders may accept gifts from extended family or other sources under specific conditions. The Financial Consumer Agency of Canada (FCAC) notes that lender policies differ; verify your lender's eligible-donor criteria with your mortgage professional before finalizing any gift arrangement.

Canada does not have a federal gift tax, so down payment gifts from family members are generally not taxable to the recipient and do not need to be reported as income for federal income tax purposes (as of 2026-07-27 — verify current). However, if the donor sells an asset (such as securities or a second property) to generate the gift, capital gains tax may apply to the donor; consult a licensed tax professional. The Canada Revenue Agency (CRA) may also review large deposits during audits; keep documentation of the gift letter and bank transfers for your records.

A compliant gift letter typically includes: (1) the donor's full legal name, address, and relationship to the buyer; (2) a statement that the funds are a true gift with no expectation of repayment; (3) the exact dollar amount; (4) the property address or that it is for a down payment; and (5) the donor's signature and date. Many lenders provide a template; verify the exact requirements with your mortgage lender or broker before the gift is made, as formats and required attachments (bank statements, proof of transfer) vary.

A properly documented down payment gift generally does not negatively affect mortgage approval; in fact, it increases your down payment and may reduce the required mortgage insurance premium if you reach a higher equity threshold (for example, 20% (as of 2026-07-27 — verify current) or more avoids CMHC or other mortgage default insurance). However, lenders will verify the source of the gift to ensure it is not a disguised loan that could affect your debt-service ratios. The Financial Consumer Agency of Canada (FCAC) notes that undisclosed loans can lead to mortgage fraud allegations; always provide accurate documentation and consult your mortgage lender or a BC mortgage professional.

No. Property transfer tax (PTT) under the Property Transfer Tax Act, RSBC 1996, c. 378, is calculated on the fair market value of the property being transferred, not on the source of the buyer's funds. A down payment gift does not increase the taxable value or trigger additional PTT. However, first-time buyers should verify eligibility for the First-Time Home Buyers' Program exemption (up to $835,000 (as of 2026-07-27 — verify current) fair market value for a full exemption) with the BC Ministry of Finance or a BC lawyer or notary, as other conditions apply.

No. The gift letter is a private document between you, the donor, and your mortgage lender; it is not registered on title at the BC Land Title Office under the Land Title Act, RSBC 1996, c. 250. The lender keeps the letter in your mortgage file for underwriting and audit purposes. Only interests in land (such as mortgages, easements, or covenants) are registered; cash gifts do not create a registered interest.

Yes, you may use a gift to fund a down payment, subject to your lender's policies. However, if you are not a Canadian citizen or permanent resident, you may be subject to the additional property transfer tax (an additional 20% (as of 2026-07-27 — verify current) under the Property Transfer Tax Act, RSBC 1996, c. 378) when buying residential property in certain BC areas, and the Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c. 10 (federal, currently extended through January 1, 2027 (as of 2026-07-27 — verify current)) may prohibit your purchase altogether unless an exemption applies. Verify your eligibility and tax obligations with a BC lawyer or notary and a licensed tax professional before proceeding.

Misrepresenting a loan as a gift on a gift letter can constitute mortgage fraud, which may lead to criminal charges, immediate loan recall by the lender, and civil liability. Mortgage lenders rely on accurate debt disclosures to assess your ability to repay; undisclosed loans distort debt-service ratios and violate your mortgage contract. If you intend to repay the funds, disclose them as a loan to your lender and consult a BC mortgage broker or lawyer—some lenders permit documented family loans with appropriate underwriting adjustments.

Most mortgage lenders and Canada Mortgage and Housing Corporation (CMHC) provide gift-letter templates and guidelines on their websites. The Financial Consumer Agency of Canada (FCAC) also offers consumer resources on down payments and mortgage documentation at www.canada.ca/en/financial-consumer-agency.html. For legal or tax questions specific to your transaction, consult a BC lawyer, notary public, or licensed tax professional; for mortgage-qualification questions, speak with a licensed BC mortgage broker.