Short answer
Possibly. If a family member sells below market value, a lender may recognize part of the difference as gifted equity under an eligible program. The lender decides the value and required cash, while the lawyers and tax advisers address land-transfer-tax, capital-gain and family consequences.
The problem families discover too late
The family agrees on a price and assumes the discount replaces every dollar of cash down payment. The appraisal is lower than expected, the insurer applies different rules or the seller still needs enough proceeds to discharge the mortgage.
A practical Ontario example
A parent’s home appraises at $800,000 and the agreed price is $700,000. The $100,000 difference is not automatically accepted as down payment. The lender must approve the transaction, relationship, appraisal and gift structure, and closing costs may still require cash.
How A, alternative/B and private routes may differ
- Insured A mortgage: the lender and mortgage insurer must approve gifted equity and the borrower must meet insured-program requirements.
- Conventional A or alternative/B mortgage: may consider family equity with at least 20% effective equity, subject to appraisal and policy.
- MIC/private lender: may use appraised equity more flexibly, but independent appraisal, legal advice and exit planning remain important.
Policy boundary: Each lender and mortgage insurer sets its own borrower, guarantor, gift, debt-service and title requirements. FCAC explains consumer rights and general mortgage concepts; it does not set individual lender underwriting policy.
Questions the family should answer
- What value will the lender use?
- How much cash is still required?
- Can the seller discharge all debts?
- What tax and estate consequences should each party review?
Rajiv’s practical view
Treat a family sale like a real transaction. Use independent lawyers where advised, obtain the appraisal early and put the intended gift or price reduction in writing.
Source and context
General Ontario education. Lender, mortgage-insurer, tax, title and legal treatment depend on the facts and documents. Examples are not approvals, quotes, tax advice or legal advice.
Continue your research
Mortgage Knowledge Centre · First-home-buyer rules · Real Estate Centre
Sharing ownership or family money?
Ask Rajiv for a referral to an Ontario real-estate lawyer who can document the arrangement before closing. You decide whether to retain anyone referred.
Want to help without creating the wrong mortgage?
Send Rajiv the purchase price, down payment, family contribution and each person’s future borrowing plans. He can compare A, alternative/B, MIC and private options where appropriate.
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Rajiv Verma, Mortgage Broker · Ontario