What You Need to Know About Gifted Down Payments

Buying a home in British Columbia can be challenging—especially when it comes to saving for that all-important down payment. With high property prices and rising living costs, many first-time homebuyers are turning to family for help. If you’re one of them, you’ve probably heard the term “gifted down payment.”

As your local licensed mortgage broker, I’m here to walk you through what a gifted down payment is, how it works, and what both buyers and givers need to know before moving forward.

💸 What Is a Gifted Down Payment?

A gifted down payment is money given to a homebuyer—usually by an immediate family member—to help them buy a home. This money is not a loan and is not expected to be paid back.

In most cases, gifted down payments come from:

• Parents

• Grandparents

• Siblings

Some lenders may allow gifts from extended family or even close friends, but it varies by lender and situation.

✅ Lender Requirements: What You’ll Need

Lenders have strict guidelines when it comes to gifted funds. Here’s what you’ll typically need:

1. A Gift Letter

This is a simple document signed by the gift giver confirming:

• The money is a gift, not a loan

• The giver has no expectation of repayment

• The relationship between the giver and receiver

Each institution typically has their own template for this so I will provide this for my clients.

2. Proof of Transfer

Lenders will want to see that the gifted funds have been deposited into your bank account, usually 30 days before closing. Keep all documentation, including bank statements.

3. Verification of Donor’s Source of Funds (Sometimes)

Some lenders may ask for proof that the donor had the funds available legitimately (e.g. from savings or investments). This is more common with larger gift amounts.

📊 How Much Can Be Gifted?

There’s no legal limit on how much can be gifted, but there are a few important points:

• For insured mortgages (with less than 20% down), most lenders require that at least part of the down payment comes from the buyer’s own resources—though some exceptions exist.

• For conventional mortgages (20% or more down), it’s more flexible and 100% of the down payment can be gifted.

I can advise based on your specific scenario.

⚠️ Important Considerations for Both Parties

For the Homebuyer:

• A gift is not tax-deductible, and you don’t need to report it as income.

• You must be honest with your lender—pretending a loan is a gift could result in mortgage fraud.

For the Gift Giver:

• There are no taxes on gifts in Canada, but if the giver’s finances are ever reviewed (e.g. for government benefits or taxes), a large gift might raise questions.

• It’s wise to speak with a financial advisor before giving a large amount.

Final Thoughts From Me

Gifted down payments are becoming increasingly common in BC’s competitive housing market. They can make homeownership more accessible, but like any financial strategy, they must be done properly to avoid issues during the mortgage approval process.

As your professional mortgage broker, I’ll help you:

• Ensure your gift meets lender requirements

• Prepare the necessary paperwork

• Avoid any red flags that could delay your approval