What’s the best way to gift my child money for a home?
Helping out with the down payment is the most common way parents help their children purchase a home. If your child is short of a 20% down payment, it’s beneficial to help them reach that number—if only the minimum 5% is put down when purchasing a property, they’ll need to pay for mortgage insurance which means their monthly payments will be higher. Extra money for a down payment can also increase their budget and widen their home search. Is your child self-employed? If so, they will have to pay 5% of the down payment themself to help prove to the lender that they can handle mortgage payments.Can anyone provide a gift?
Immediate family members, including grandparents and siblings, in addition to parents, can provide a monetary gift for a down payment, but friends cannot.Is there a gift tax?
Canada has no gift tax, so neither you nor your child will have to pay any taxes on the money provided.What’s a mortgage gift letter, and why do I need one?
You’ll need to write a mortgage gift letter if you’re providing money for a down payment. This document offers transparency around the gift, helps the mortgage lender verify where the substantial amount of money is coming from, and confirms that it won’t need to be repaid by the recipient. Most lenders have a letter template you can fill out. If you’re writing it yourself, include the following information:- Your name and contact information
- The giftee’s information, including their relationship to you
- The amount of money you’re gifting
- A clear statement that the gift does not require repayment
- The address of the property being purchased
- Bank statements confirming deposit of the gift
Once you help your child secure their home, see if they qualify for these first-time home buyer incentives and rebates.
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