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Planning on Gifting a Down Payment This Holiday Season?

The season of giving is upon us. For some, that means Black Friday shopping to be sure there are some happy kids on Christmas morning.

For others, it could mean forking out tens of thousands of dollars to help their adult children realize their dream of becoming a home owner. 

Gifted down payments from family is playing a larger role in today’s home purchases. Considering it now takes an average of 6 years to save up the minimum down payment, it’s no wonder.  Even longer in the hot markets of Toronto and Vancouver.

Almost half of today’s Gen Z and Millennial buyers (47% and 46% respectively) are receiving financial assistance from their parents or grandparents, according to figures from Manulife Bank.

Over the past year that’s amounted to an estimated $10 billion in down payment assistance, or 10% of total mortgage down payments, according to CIBC economist Benjamin Tal.

And as home prices continue to soar, so too has the size of the average gifted down payment, to a whopping $82,000!

What You Need to Know

Are you or someone you know considering joining these statistics by helping an adult child with a down payment contribution, or asking for help from a relative? If so, here are a few pointers to keep in mind to ensure a smooth process..…

  1. Remember, this is to be considered a GIFT, not a loan. 
    As the name suggests, a gifted down payment is just that, a non-repayable gift. There should be no expectation of repayment at any time; otherwise the lender would treat those funds as a loan or a debt. 
  2. Note these restrictions.
    There are certain restrictions when it comes to gifting down payment funds. For example, some lenders won’t allow the property being purchased to be a rental or investment property, and some gifted funds can’t come from outside of Canada (or the gift could be limited in such cases). And in most cases, you’re ineligible to gift funds if you’ve previously had a bankruptcy.

  3. Keep good records. 
    While most parents would probably be happy to simply write a cheque, lenders actually require additional documentation, such as a gift letter signed by all parties declaring that the funds are indeed a gift. They may also need confirmation of the amount of the gift and proof of the source of funds, as well as personal details of those involved (names, addresses and relationship of the parties). In most cases, lenders restrict down payment gifting to immediate family members, such as a parent, grandparents, child, sibling or legal guardian.


Today’s housing market presents unique challenges for young buyers wanting to purchase their first home, but there are almost always options still available.
If you or someone you know is considering purchasing with the help of a family member, call me today so we can review the situation and determine whether a gifted down payment is the answer.