A gifted down payment is money a close family member gives you toward buying a home, with no expectation that you pay it back. In Canada it is legal, common, and not taxed as income when it reaches you. What your lender wants is proof of where it came from: a signed letter confirming the funds are a true gift and not a loan in disguise.
Most lenders, and the default insurers behind them, expect the gift to come from an immediate family member. Usually that means a parent, grandparent, sibling, or child. Money from friends or distant relatives is generally not accepted on a standard mortgage. If your down payment is under twenty percent of the price, you will need an insured mortgage, and a gift from immediate family can cover the entire amount.
The paperwork that makes it official is a gift letter. It names the giver and the buyer, states how they are related, lists the exact amount, identifies the property, and confirms in plain language that the money never has to be repaid. That last point matters. If a lender suspects the gift is really a loan, it can count a repayment against you and shrink the mortgage you qualify for.
Timing catches people out. Lenders usually want the funds in your account well before closing, often fifteen to thirty days. When the money comes from outside Canada, or from someone who is not next of kin, anti money laundering checks can push that to around ninety days. The giver's own statements usually stay private. The lender mainly needs to see the money arrive with you.
Canada has no gift tax, so neither side owes tax on the transfer itself. One wrinkle is worth knowing. If your parents sell investments or a second property to free up the cash, that sale can trigger capital gains tax for them, even though the gift reaching you stays tax free.
A gift can sit beside your own savings rather than replace it. Many buyers combine family help with a First Home Savings Account or money drawn from an RRSP, and lenders accept a down payment built from more than one source.
In Toronto, where entry prices for condos and freeholds often run into the high six figures, family gifts have become a common way younger buyers reach a down payment at all. Keep one distinction straight. The gift goes toward your down payment, which is not the same as the deposit you submit with an offer. The deposit comes due within days of a firm deal, so gifted money you are counting on needs to be reachable early.
Related reading: How Much Down Payment Do You Need in Toronto?, Home Buyers' Plan: Using Your RRSP to Buy in Canada, and How Much Are Closing Costs When Buying a Home in Toronto?
