Short answer
A gifted down payment may be acceptable, but the lender still decides who may give it, what relationship is permitted, how long the funds must be visible and which documents prove the transfer. The gift normally must be genuine rather than an undisclosed loan. A signed gift letter by itself may not complete the trail. The lender may also request the recipient’s statements, transfer record and evidence that the donor had the funds. Confirm the intended lender’s current requirements before moving money or waiving a financing condition.
The client problem behind the question
A family member has already helped, the money is in your account and you believed the down payment was solved. Close to funding, the lender asks for a gift letter, account history or proof from the donor. The immediate concern is whether the gift can be documented in time and whether any part of it must be repaid.
Clients often hear that “family gifts are allowed” and assume every family relationship, transfer method and mortgage program works the same way. They do not. A parent’s gift transferred directly from an established account is different from cash deposited through several relatives, money advanced on a family line of credit or funds that must be repaid after closing.
What should be checked first?
Confirm the donor relationship, the gift amount, the date the funds became available and whether repayment is expected. Keep the signed lender-form gift letter, recipient statements and transfer evidence. Where the lender asks for donor-side proof, provide it through the requested secure process. If the donor borrowed the money, do not describe it as the borrower’s debt-free savings; disclose the structure and let the lender decide.
A broker should separate four things: what the documents prove, what remains uncertain, what the current lender’s policy requires and what Rajiv’s professional interpretation suggests as the next responsible step. A regulator or insurer source does not replace the intended lender’s written program requirements.
A practical Ontario example
Illustration only: A first-time buyer receives $70,000 from a parent two weeks before closing. The transfer is visible, but the parent first deposited several bank drafts into a newly opened account. The lender asks for more history. The broker builds the trail from the parent’s original investment redemption through the new account and into the buyer’s account. If part of the money is expected back after closing, the structure is not a straightforward non-repayable gift and must be reassessed.
This is not an approval, lender quote or account of an identifiable client. The result can change when even one material fact changes.
Can the existing A-lender approval still work?
An A lender may accept an eligible gift when its relationship, letter and documentation rules are met. If the existing lender cannot accept the donor or the trail, another A lender is not automatically a solution; the new lender may ask the same or more detailed questions and the closing timeline may be too short.
Where another A lender may fit
Another A lender should be considered when the verified file genuinely fits its current income, credit, property, valuation and timing policies. It is not useful to send the same unresolved problem to several institutions. The broker should identify the policy difference first, confirm the closing date can be met and limit unnecessary credit inquiries.
Where an alternative or B lender may fit
An alternative lender may have a different approach to gifted or borrowed funds, particularly where the borrower has at least 20% down and the overall file is strong. The broker must still test whether a payment is attached to the funds and disclose it. Higher rate and fees can make a documentation shortcut expensive.
Where an MIC or individual private lender may fit
Private or MIC financing may sometimes bridge a closing where equity is sufficient, but it should not be used to disguise the true source of the down payment. Review net funds, priority of registrations, legal costs, payment ability and a defined exit to B or A lending.
An MIC is a professionally managed mortgage investment corporation using pooled investor capital. An individual private lender lends private capital. Their underwriting, terms and pricing can differ. Neither route should be described as an automatic approval, and both require a complete cost and exit review.
What should the client avoid doing?
- Do not hide a material change or assume it will remain undiscovered.
- Do not make repeated credit applications without a lender strategy.
- Do not move or spend closing funds until the remaining cash requirement is recalculated.
- Do not rely on a verbal approval, estimated value or unconfirmed exception.
- Do not accept a higher-cost mortgage without reviewing the net advance, payment, fees, maturity and exit.
Questions to ask before acting
- Is the money a true gift or will anyone expect repayment?
- Does the lender permit this donor relationship?
- Whose statements and transfer records are required?
- Was any part deposited in cash or borrowed?
- What is the backup plan if the trail cannot be completed on time?
What can change the answer?
The answer can change with donor relationship; whether repayment is expected; source of the donor’s funds; transfer method; mortgage type; insurer involvement; lender gift policy; amount of the buyer’s own funds; property value; and days left before closing.
Scope note: Gift rules vary by lender, program and mortgage-insurance context. The article does not claim that one documentation standard applies to every mortgage.
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Mortgage second opinion or strategy session
If the closing is approaching and the answer still depends on lender policy, request a Mortgage Second Opinion or Mortgage Strategy Session through SimplifyMortgage.ca. Bring the commitment, condition list, purchase agreement, current income and credit documents, property information and proof of closing funds. Rajiv can identify the pain point, test practical lender routes and explain the trade-offs before another application or financing decision is made. This link takes you to Rajiv’s business website.