Helping Your Children Buy a Home: Gifts, Loans and Fairness

Watching your children struggle to buy their first home in Toronto can be hard. Many parents want to help, and many can, often with money from selling a family home or downsizing. Helping is a generous thing to do. It also works best when it is planned with care, so that your own future stays secure and your family stays close.

This guide walks through the main ways parents help, the paperwork usually expected, and the questions of fairness and retirement security that are easy to overlook.

Start with your own security

Before you decide how much to give, decide how much you can afford to give. You may live another twenty or thirty years, and you may need home care, a retirement residence or simply more help than you need today.

Do I know roughly what I will need to live on for the rest of my life, including care?
If I give this money, will I still have a comfortable cushion for emergencies?
Would I be relying on my children to pay me back, or to help me later?

An example: a widowed father sells his Willowdale house, moves into a condo, and wants to help his daughter with a down payment. After sitting down with an advisor, he gives a smaller amount now and holds the rest until he knows what his own care costs will look like.

Helping is not an all-or-nothing choice. A smaller gift now, with more later if you can, is often kinder to everyone than a large gift you later regret.

The four main ways parents help

Each option has a different effect on your money, your legal rights and your relationship with your child. None is right for every family.

Option	What it means	Things to think about
A gift	You give money and do not expect it back.	Simple and clear, but the money is gone. If your child separates from a partner, how the gift is treated can depend on how it was documented.
A family loan	You lend money and expect to be repaid, with or without interest.	Protects your interest, but needs proper paperwork. The lender for the mortgage will want to know about it.
Co-signing	You sign the mortgage as a guarantor or co-borrower.	You can be responsible for the whole debt if payments are missed. It may also affect your own ability to borrow later.
Going on title	You become a legal co-owner of the home.	You share ownership, rights and responsibilities. It can have tax and estate consequences. See Adding Children to Title: Know the Risks.

Some families combine these. Whatever you choose, talk it through with your own lawyer before any money moves.

Gifts and the lender’s gift letter

If you give money toward a down payment, your child’s mortgage lender will want to know where it came from. Lenders commonly ask for a signed gift letter confirming that the money is a true gift and does not have to be repaid, along with proof that the funds have been deposited in your child’s account. CMHC, for example, lists a non-repayable financial gift from a relative among acceptable sources of a down payment for the mortgages it insures.

Signing a gift letter is a serious statement. If you expect to be repaid, do not sign a letter that says otherwise; be honest with the lender and your lawyer about what you intend.

If your child is a first-time buyer, they may also be able to save through a First Home Savings Account (FHSA), a registered plan for first-time home buyers to save toward a qualifying first home, tax-free up to certain limits. The rules about who can open one and how much can go in are set out on the Government of Canada FHSA page. Your child’s bank or accountant can explain whether it fits their situation.

Documenting a family loan

A loan between family members is still a loan. Without paperwork, it can turn into a misunderstanding years later, after a separation, or when you are no longer here to explain.

Agree on the terms. How much, whether there is interest, how and when it will be repaid, and what happens if the home is sold.
Put it in writing. A lawyer can prepare a promissory note or loan agreement that sets out the terms clearly.
Ask about security. Your lawyer can explain whether registering a mortgage on the property in your favour makes sense, and how that fits with the bank’s mortgage.
Tell the mortgage lender. A loan is a debt your child must repay, and the lender needs to know about it when assessing the mortgage.
Keep records. Keep the agreement and a record of repayments safe, and tell your estate trustee where they are.

Get independent advice. It is usually wise for you and your child to each have your own lawyer, so that each of you understands what you are signing.

Co-signing and going on title

Co-signing can help a child qualify for a mortgage they could not get alone. The risk is that if your child cannot pay, the lender can look to you. That could happen because of a job loss, an illness or a separation, not only carelessness.

Going on title as a co-owner is a bigger step. You become a legal owner of the home. Depending on how title is held, your share might pass to your child automatically when you die, or it might form part of your estate. Being an owner of a home you do not live in can also have tax consequences, including on capital gains when it is sold, because it may not qualify as your principal residence. These questions are explained in Adding Children to Title: Know the Risks, and a lawyer and accountant should look at your particular situation.

Fairness between your children

If you have more than one child, helping one of them can raise quiet questions among the others. A son in Calgary may not mind that his sister in Toronto received help with a down payment, until the estate is being settled and no one is sure whether that money was a gift or an advance on her inheritance.

Decide what you mean. Is this a gift, a loan, or an early share of their inheritance?
Write it down. Your lawyer can reflect your intentions in your will, for example by equalizing what each child receives, if that is what you want.
Update your will. A will made before the gift may no longer reflect your wishes. See Legal & Estate and Working Together as Siblings.

Fairness does not always mean equal amounts. What matters is that your choices are clear and recorded, so your children are not left to guess.

Taxes, kept simple

Tax rules around gifts, loans, interest and co-ownership can be complicated, and they depend on your circumstances. Before you give or lend a significant amount, ask your accountant a few plain questions:

Will this gift or loan have any tax effect for me, now or later?
If I go on title, what happens with capital gains when the home is sold?
If I am selling my own home to fund this, how does the principal residence exemption apply to that sale?

For an overview of other tax topics for older homeowners, see Sale Proceeds, Taxes and Benefits.

Frequently asked questions

Should I give the money now or leave it in my will?

There is no single answer. Giving now lets you see your child enjoy it and may help them at the moment it matters most. Leaving it in your will keeps your options open. Many parents do a little of both, after checking that their own needs are covered.

Can I change a gift into a loan later?

It is much better to decide at the start. A gift letter tells the lender the money does not need to be repaid, so speak to a lawyer before money changes hands.

What if my child’s relationship ends?

How a gift or loan is treated if your child separates can depend on family law and on how the money was documented. A family lawyer can explain the options before you give, which is the best time to ask.

How Irina can help

If you are thinking of selling to help your children buy, or helping them find their first home, Irina is happy to talk it through in a relaxed, no-pressure way, in English or Russian. She can help you understand what your home may sell for and how the timing might work for everyone. Contact her whenever you are ready.

Related from Irina. If your child is buying for the first time, Irina’s free first-time buyer guide and her mortgage calculator are good places to start.

Official resources