Buying a home is an exciting milestone, but for many first-time buyers, saving for a down payment can be a challenge. If you’re receiving financial help from an immediate family member, you’ll need to provide your lender with a gift letter — a document that confirms the money is a gift, not a loan, and does not need to be repaid.
At Canadian Mortgage Professionals, we guide clients through every step — including making sure your gift letter meets lender and insurer requirements. Most lenders will require a copy, and we would provide one to any client obtaining a gift for a down payment.
Why Do Lenders Require a Gift Letter?
Lenders need to confirm:
✔️ The gift does not need to be repaid.
✔️ The money comes from a legitimate source.
✔️ The gift will not add hidden debt or future repayment obligations.
This ensures your mortgage remains your only major repayment responsibility and protects both you and your lender.
Gift Letter Requirements
A valid mortgage gift letter must include:
Borrower’s name
Donor’s name, address, and phone number
Relationship between donor and borrower (immediate family required)
Exact gift amount
A clear statement confirming the gift is not a loan
Property address being purchased
Gifted Down Payment Rules: Salaried vs. Self-Employed
✅ Salaried Employees
If you’re a salaried employee, the entire down payment can be gifted by an immediate family member.
✅ Self-Employed Using Stated Income (Insured Mortgages)
If you are self-employed and applying under a stated income insured mortgage program, at least 10% of the down payment must come from your own savings. The remainder can be gifted by an immediate family member.
➡️ This applies to insured mortgages where the down payment is less than 20%.
✅ Self-Employed with Traditional Income Verification or Uninsured Mortgages
If you can fully document your income with traditional proof (tax returns, financial statements, etc.) — or if you have a down payment of 20% or more (uninsured mortgage) — many lenders will allow the entire down payment to be gifted, subject to lender discretion.
Are Gifted Down Payments Taxable in Canada?
No — Canada does not have a gift tax. Both the donor and the homebuyer avoid tax consequences on gifted down payment funds. However, if the funds come from outside Canada, lenders may require documentation showing the source and transfer history.
Sample Gift Letter Template
[Date]
To whom it may concern,
I, [Donor’s Name], hereby confirm that I am gifting [Gift Amount] to [Homebuyer’s Name], my [Relationship to Borrower], to be used toward the purchase of the property located at [Property Address].
This gift is not a loan, does not need to be repaid, and no part of this gift is from any party with an interest in the transaction (including the seller, realtor, or mortgage broker).
The funds are from:
[Type of Account]
[Financial Institution Name]
Timing Matters: Plan Ahead
Most lenders require the gifted funds to be deposited into the borrower’s account at least two weeks before closing. Some may also request a 90-day bank account history to confirm the transaction.
By preparing your gift letter and required documentation early, you can avoid unnecessary delays and move forward with confidence.
FAQs About Mortgage Gift Letters
Can a friend gift me money for a mortgage down payment?
Lenders typically require the donor to be an immediate family member (parent, sibling, grandparent, or spouse). If the donor is a close friend, additional documentation may be required, and lender approval is not guaranteed.
How much money can be gifted for a mortgage in Canada?
There is no limit on how much can be gifted for a down payment. However, self-employed buyers using stated income programs must contribute at least 5% from their own savings.
Do I need to pay taxes on gifted down payment money?
No! Canada does not have a gift tax, so there are no tax implications for the donor or recipient.
What happens if my gift letter isn’t accepted?
If your lender rejects your gift letter, it could be due to missing information, an unapproved donor, or lack of proof that the funds have been deposited. Make sure your letter includes all required details and that the money is transferred properly.
Final Thoughts
Receiving a financial gift for a down payment can make homeownership more achievable, but it’s important to follow the correct process to satisfy lender requirements. If you’re planning to use gifted funds, our team at Canadian Mortgage Professionals is here to guide you through the details and ensure your mortgage approval process goes smoothly.
