If so, you’re not alone. Gift giving has become increasingly common in recent years, as rising living costs push more Canadians to rely on support from loved ones to secure their first mortgage.
As of 2024, 30% of first-time buyers received financial gifts—either partially or fully—to support their down payment, according to Canada Mortgage and Housing Corporation’s (CMHC) latest consumer survey.
“I think for first-time homebuyers, I would say that percentage…is way up from that, from my book of business you’re looking at 65% or 70%” notes Tracy Valko, Principal Mortgage Broker with Valko Financial. “The amount young people can save now for a down payment with the high rate of inflation we’ve had and the high cost of living…they are limited.”
Meanwhile, a survey by Mortgage Professionals Canada earlier this year revealed that 60% of buyers who received financial assistance said they wouldn’t have been able to afford their home without it.
Down payment gifts are no longer just for first-time buyers
On the ground, Valko is also seeing an increase in those relying on gifts to secure homes as they move up the property ladder—for example, young families looking to move into larger homes as they begin to have children.
This group of homebuyers, often referred to as “move-up buyers,” has historically been less dependent on gifts to transition into larger family homes. However, with rising home prices and tools like the First Home Savings Account (FHSA) primarily geared toward first-time buyers, they too are feeling the financial strain.
“They’ve got great equity because they’ve built it up over the last five years, but it’s still not enough to get them there—not only from a qualification perspective, but also an affordability perspective because rates are still so high,” adds Valko.
What you need to know when gifting a down payment
If you’re considering helping with a down payment, it’s important to be aware of the risks.
Tip #1:
Chief among them is ensuring that your loved one properly discloses the gift to their broker and prospective lender. While this may add a layer of complexity—since some lenders may view reliance on gifts with caution—it can prevent major issues later, such as a denied application or, worse, an unaffordable mortgage after qualification.
The average size of down payment gifts in Canada soared to $77,487 in 2024, according to the CMHC survey, with high-demand markets like B.C. seeing averages exceeding $150,000. This increase reflects a fundamental shift in the risk profiles of mortgages Canadians are taking on to secure their first home.
“I’m seeing a lot of borrowers coming in with six-figure gifts,” notes Clinton Wilkins, Team Leader with the Clinton Wilkins Mortgage Team.
“Imagine you’re a first-time homebuyer, and the bank of mother and father are gifting you $100,000-plus dollars,” he said. “I think what’s happening is people are coming in with these large gifts and are doing conventional mortgages—years ago, first-time homebuyers were getting a high-ratio insured mortgage with the Canadian Mortgage Housing Corporation, so it’s changed the nature of first-time home buyers a little bit.”
Tip #2:
Another important step to minimize the risks of gift giving is addressing how the gift will be handled if the mortgage needs to be unwound. While it’s not the most festive topic—perhaps one to tackle after the holidays—it’s crucial to determine how the gift should be protected in the event of a divorce or division of assets.
Whether your intention is for your child to retain the equivalent equity of the gift, for it to be returned to you, or for it to be split equally, the key is to work with your loved one and their spouse to ensure these intentions are clearly documented and legally binding.
“Make sure you’re speaking to your real estate lawyer,” says Valko. “I’ll tell you, I have had a lot of clients who have split up, and they’ve really thanked me that they were able to put this in place, because I’ve seen what happens when there is no agreement.”
Valko explains that disputes often arise during separations when no prior agreement was made regarding gifted down payments. “Maybe the wife’s parents gave $200,000 and she’s got to split the equity…it’s heartbreaking.”
Tip #3:
A final often-overlooked risk for gift givers is ensuring that the gift doesn’t jeopardize their own financial stability. While it’s natural to want to prioritize helping loved ones, overextending your resources to support their homeownership goals could leave your own nest egg in a vulnerable position.
A 2020 survey by the Canadian Institute of Actuaries revealed that many Canadians underestimate the duration of their retirement and the financial challenges it entails, potentially leading to an overestimation of how much they can afford to give. To avoid this, it’s crucial to evaluate the impact of the gift with your financial planner or mortgage professional.
For those who are financially secure and have carefully assessed the risks, giving a down payment gift can be an incredibly rewarding experience, made even more valuable by taking the steps to do it responsibly.
“What I really like from the gift-giver’s perspective is they’re enabling someone to achieve their dream of homeownership, and they are able to celebrate that with the gift receiver while they are still alive, and able, and willing,” adds Wilkins, “I hear so many people say, ‘I wish I would have done this 10 years ago, 20 years ago.’”
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Last modified: December 22, 2024
