Who can give a down payment gift?

Lenders most commonly accept gifts from immediate family members, such as parents or grandparents. Rules on eligible givers vary by lender, so it is worth confirming before you rely on a gift.

Does the gifted money have to be repaid?

No. A gift letter specifically confirms the funds are a genuine gift with no expectation of repayment. If the money had to be repaid, it would be a loan and would affect your qualifying.

What does a lender need besides the gift letter?

In addition to the signed letter, lenders often ask for proof the gifted funds have been deposited into your bank account, and they may want to see the giver's relationship to you confirmed.

Mortgage Glossary

What is Gift Letter?

A gift letter is a signed document confirming that money given toward a home buyer's down payment is a genuine gift, not a loan, and does not have to be repaid. Lenders require it when down payment funds come from a family member, so they can be sure the gift is not a hidden debt that would affect the borrower's ability to repay the mortgage.

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Quick answer

Also known as: Down payment gift letter

Key points

Confirms in writing that down payment funds are a gift, not a loan.
Required by lenders when gifted money is used for a down payment.
Usually states the amount, the relationship, and that no repayment is expected.
Gifts most commonly come from immediate family members.
Lenders may also ask for proof the gifted funds were deposited into your account.

Gift Letter explained

When a buyer uses gifted money for some or all of their down payment, the lender needs assurance that the funds are truly a gift. A gift letter, signed by the person giving the money, typically states the amount, the relationship between the giver and the buyer, confirmation that repayment is not expected, and that the funds are the giver's own. This protects the lender by confirming the borrower does not have an undisclosed loan adding to their debt obligations.

Gifts most often come from immediate family members, such as parents, and lenders may also ask for proof that the funds have been deposited into the buyer's account. A genuine gift can be a powerful way to boost a down payment, lower the loan-to-value ratio, and improve qualifying numbers, but it must be documented properly to satisfy the lender.

What a Gift Letter is for

A gift letter exists to verify that gifted down payment funds are not a loan in disguise. It gives the lender confidence that the money will not need to be repaid and therefore will not strain the borrower's budget or distort their debt service ratios.

How it can help you

A gift letter lets a buyer use family help toward their down payment with the lender's full acceptance, which can mean a larger down payment, a smaller mortgage, and stronger qualifying. Because lenders differ on who can give a gift and what documentation they need, Lenderoo shops 40+ lenders for free to help you find one whose gift rules fit your situation.

When it comes up

A first-time buyer receives $50,000 from their parents toward a down payment. The lender requires a gift letter, which the parents sign confirming the money is a non-repayable gift. With the documentation in place, the lender accepts the funds and the buyer puts down a larger down payment.

Example: Using a family gift

A buyer is purchasing a $500,000 home. They have $25,000 of their own savings and receive a $50,000 gift from their parents, giving them $75,000 toward the down payment.

The lender asks for a signed gift letter stating the $50,000 is a true gift with no repayment expected, along with proof the funds were deposited into the buyer's account. With the letter and deposit confirmed, the buyer's $75,000 down payment is 15% of the price, lowering the loan-to-value ratio and the mortgage insurance premium compared with a minimum down payment.

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Questions & answers

Gift Letter: frequently asked questions

Common questions Canadians ask about gift letter.

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Related mortgage terms

Down Payment

The upfront cash payment made when purchasing a home

Read definition

Conditional Approval

A lender approval subject to conditions like income verification and appraisal.

Read definition

Loan-to-Value Ratio (LTV)

The ratio of the mortgage amount to the property's value, shown as a percentage.

Read definition

Mortgage Insurance

Insurance that protects the lender if a borrower defaults on the mortgage.

Read definition

First-Time Home Buyer

Someone purchasing their first property.

Read definition

Back to full glossary

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Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary

Mortgage Glossary

What is Gift Letter?

Find my best mortgage Back to glossary

Quick answer

Also known as: Down payment gift letter

Key points

Confirms in writing that down payment funds are a gift, not a loan.
Required by lenders when gifted money is used for a down payment.
Usually states the amount, the relationship, and that no repayment is expected.
Gifts most commonly come from immediate family members.
Lenders may also ask for proof the gifted funds were deposited into your account.

Gift Letter explained

What a Gift Letter is for

How it can help you

When it comes up

Example: Using a family gift

A buyer is purchasing a $500,000 home. They have $25,000 of their own savings and receive a $50,000 gift from their parents, giving them $75,000 toward the down payment.

Have a question about gift letter?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Gift Letter: frequently asked questions

Common questions Canadians ask about gift letter.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary