A gift letter for a mortgage is the short, signed document your lender asks for whenever part of your down payment is coming from family instead of your own savings. It states plainly that the money is a true gift, not a loan you’re quietly expected to repay, because a lender needs to know your real debt load before deciding how much mortgage you can handle. Most buyers assume it’s a formality their parents sign without much thought. It isn’t quite that simple: the letter has specific wording a lender will reject if it’s missing, the list of who can actually give the gift is narrower than most people assume, and treating a real loan as a gift on paper can cross into mortgage fraud. For the rest of what a Toronto purchase involves, see our complete Toronto real estate guide.
What a gift letter proves, and why your lender wants one
Every mortgage application in Canada requires proof of where your down payment actually came from, and the lender has a specific reason for asking. If money that shows up in your account weeks before closing turns out to be an undisclosed loan, you’re carrying more debt than your application states, and that changes whether you can actually afford the payments the lender is about to approve. A gift letter settles that question in writing. It tells the lender the money is a genuine, no-strings gift, not a loan from a parent, a line of credit, or anything else you’re quietly on the hook to repay. The lender isn’t asking because it doubts your family’s generosity. It’s confirming that your real financial position, debt included, matches what’s on the application, because an underwriter who approves you based on an understated debt load is the one left exposed if you can’t actually make the payments.
Inside the letter: what it actually has to say
A gift letter is short, usually a single page, and every lender’s version asks for the same core facts. It names the donor and states their relationship to you, since that relationship is what makes the gift eligible in the first place. It states the exact dollar amount being gifted and the date the funds changed hands or will. Most importantly, it says plainly that the money is a gift, that no repayment is expected now or later, and that it carries no interest, no security against the property, and no condition attached. Both you and the donor sign it.
Sagen, one of Canada’s two private mortgage insurers alongside CMHC, publishes its own version of these requirements, naming the giftor’s relationship to the borrower, the dollar amount, and a statement that the gift is non-repayable as the core elements any version of the letter needs. Your lender supplies its own template rather than accepting a generic one you draft yourself, so treat this as what the letter has to accomplish, not a form to fill in on your own.
Who can give you a gifted down payment
CMHC’s own wording for an insured mortgage is broader than most people expect: it requires a non-repayable gift from a relative, without narrowing that further to an immediate relative. In practice, the lender approving your mortgage sets the rule that actually governs, and most Canadian lenders apply a tighter standard than CMHC’s own baseline. Sagen, the other major Canadian mortgage insurer, defines an eligible giftor as someone in a close familial or legal relationship motivated only by the need to help you buy a home, naming parents, children, siblings, grandparents, legal guardians and legal dependents as examples. Most lenders follow that narrower pattern: they accept gifts from parents, step-parents, grandparents, siblings and children everywhere, while an aunt, uncle or close friend wins approval from some lenders and a flat refusal from others. That’s one of the first questions to put directly to your mortgage broker or lender rather than assume it’ll be fine because CMHC’s own wording happens to be broader.
A gift letter versus seasoned funds
Our guide to mortgage pre-approval in Toronto already covers the usual rule: a lender wants your down payment sitting in your own account for a while before you apply, because an unexplained deposit that lands right before you apply is exactly what signals an undisclosed loan. A gift letter is the documented way around that wait. Instead of needing your own savings seasoned for months, you provide the letter itself, the donor’s bank statement showing they genuinely had the funds, and a record of the transfer landing in your account. Most lenders still want the gifted money to sit for a short window before closing, commonly somewhere between 15 and 30 days for a domestic gift, and longer, sometimes up to 90 days, for a transfer arriving from outside Canada, since an international transfer takes longer to trace and verify. The paper trail, not the passage of time, does the real work: a well-documented gift that landed last week satisfies a lender faster than an unexplained deposit that’s been sitting untouched for six months.
What else a gifted down payment touches
A gifted down payment doesn’t change the minimum amount you need to put down. Canada’s minimum down payment rules, updated December 15, 2024, still set the floor at 5% of the purchase price on the first $500,000, 10% on the portion between $500,000 and $1.5 million, and a full 20% on anything above $1.5 million, where CMHC-insured financing stops being available regardless of how large your down payment is. Whether that money comes from your own savings or a family gift makes no difference to which bracket you fall into or whether you still need mortgage default insurance, and lenders generally allow the entire minimum down payment to be gifted rather than capping it at a portion.
A gifted down payment also creates no separate filing or disclosure beyond the gift letter itself and your normal mortgage application. There’s no government form to submit and no tax consequence for either of you: a cash gift between family members isn’t taxable income in Canada, for the giver or the recipient. The gift letter, properly completed, is the entire paper trail this requires. It also only covers the down payment itself. Our guide to closing costs in Toronto covers the land transfer tax, legal fees and other costs that come due alongside it, gifted or not. If your down payment is coming from your own money instead, specifically an RRSP withdrawal rather than a family gift, our guide to the RRSP Home Buyers’ Plan covers that separate set of rules.
The real risk: a gift that’s secretly a loan
The scenario that turns a gift letter from paperwork into a genuine legal problem is simple: your family member expects to be paid back, quietly, outside the mortgage, while the signed letter tells your lender the opposite. That isn’t a grey area. Misrepresenting a loan as a gift on a mortgage application is a form of mortgage fraud, because it understates your real debt load to the exact institution deciding how much you can responsibly borrow. An Ontario real estate law firm’s own guidance on gift letters warns that if the money was always meant to be repaid and both of you sign a letter saying otherwise, that’s fraud whether or not any repayment ever gets registered formally against the title. It also puts your lawyer in a difficult position: mentioning to them, even casually, that the “gift” actually needs to be paid back creates a professional obligation on their part to pass that information to your lender. If a family member’s help genuinely comes with an expectation of repayment, the honest move is telling your mortgage broker before you apply, not signing a gift letter and hoping nobody asks again.
Frequently asked questions
What is a gift letter for a mortgage down payment?
A gift letter is a short, signed document confirming that part or all of your down payment is a genuine gift from a family member rather than a loan you’re expected to repay. It names the donor, states their relationship to you, gives the exact dollar amount and the transfer date, and declares plainly that no repayment is expected and that the money carries no interest or claim against the property. Both you and the donor sign it, and your lender supplies the specific template it wants used rather than accepting a generic version you draft yourselves. Lenders require it because a mortgage application has to reflect your real debt load, and an undisclosed loan dressed up as a gift would understate exactly that.
Does the money for a gift letter have to come from a parent?
No, though parents are the most common donor by far. CMHC’s own published rule allows a gift from any relative, not just an immediate one, but most lenders apply a narrower practical standard: they accept parents, step-parents, grandparents, siblings and children everywhere, while an aunt, uncle, cousin or close friend wins approval from some lenders and a turndown from others. There’s no single rule that covers every lender, so if your donor falls outside the immediate family, the right move is asking your mortgage broker or lender directly before you count on the gift, rather than assuming CMHC’s broader wording settles the question for the specific lender underwriting your mortgage.
How much of my down payment can come from a gift?
All of it, in most cases. Canadian lenders generally don’t cap the percentage of a down payment that can be gifted, so a fully gifted down payment is common, provided it still meets the minimum required for the purchase price (5% on the first $500,000, 10% on the portion up to $1.5 million) and comes with the standard documentation: a signed gift letter, the donor’s bank statement showing the funds were genuinely available, and proof the transfer actually happened. The source of the money doesn’t change your mortgage insurance premium either. What changes is the paperwork you need before your lender will count that money toward your purchase.
Does a gifted down payment affect CMHC mortgage insurance or the minimum I need to put down?
No. The minimum down payment brackets, 5% on the first $500,000, 10% on the portion between $500,000 and $1.5 million, and 20% above $1.5 million where insured financing stops being available altogether, apply the same way regardless of whether the money is your own savings or a family gift. A gifted down payment doesn’t raise or lower your mortgage insurance premium, and it doesn’t create any separate government filing beyond the gift letter and your standard mortgage application. There’s also no tax owed by either the giver or the recipient on a cash gift between family members in Canada.
What happens if the “gift” is actually expected to be paid back?
Signing a gift letter that says no repayment is expected, while privately planning to pay your family member back, is mortgage fraud, because it misrepresents your real debt load to the lender deciding how much you can responsibly borrow. This holds whether or not any repayment is ever formally registered against the title, and it applies equally if your lawyer finds out casually rather than through paperwork, since Canadian lawyers and mortgage professionals have a professional obligation to pass that information along to the lender once they know. If a family member’s help genuinely comes with strings attached, the honest and safer path is telling your mortgage broker before you apply, since a loan structured properly from the start causes far fewer problems than a gift letter that turns out not to be true.
Getting your financing sorted, gift letter included, is one more thing to settle before you start seriously viewing properties. Browse current Toronto listings to see what your budget actually buys, or explore the rest of our guides for what else comes with buying in Toronto.