Should family help be documented as a gift or a loan?

The problem families discover too late

Everyone agrees verbally while the purchase is urgent. Years later, a sale, separation or estate dispute exposes completely different memories about whether the $100,000 was a gift, loan or ownership contribution.

A practical Ontario example

Parents provide $120,000 and expect it back when the home is sold. Signing a lender gift letter that says no repayment is expected would conflict with the real agreement. The correct structure may change qualification, title and legal documentation.

How A, alternative/B and private routes may differ

• A lender: undisclosed repayment obligations can invalidate the underwriting decision.
• Alternative/B lender: may permit a disclosed family loan within policy and equity limits, but it must be priced into qualification.
• MIC/private lender: a registered family second mortgage may affect priority and require consent from the first lender.

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

• Must the money be repaid?
• Does the helper expect interest or ownership?
• Will the claim be registered on title?
• What happens after sale, separation, death or missed payments?

Rajiv’s practical view

Have the hard conversation before the transfer. A written family agreement protects the relationship because nobody has to reconstruct the promise during a crisis.