happy family walking through a green field, having received a gift letter

Getting a Gift Letter in 2022 – What To Know

Matthew Jackson Mortgage Tips

Receiving a financial gift is a fantastic way to help secure a down payment. But, there are some important steps to follow. In this blog, I’ll go through everything you need to know about gift letters in Canada in 2022. Let’s get started!

 

What is a gift?

A gift is an amount of money that is gifted to you to go towards purchasing a home. Getting a gift is one way to help Canadians buy a home, increase their mortgage approval amount or increase buying power. 

 

Where the gift comes from. 

When you receive a gift, it has to come from a direct family member. Banks will not accept a gift if the giftor is not related to the purchaser. A direct family member includes a mother, father, grandmother, grandfather or a sister or brother.

If you have a unique situation, you can reach out to me to discuss. Banks are usually very strict when it comes to gift letters, but can make the rare exceptions. 

Note: if you’re a giftor and are considering buying an entire home for a family member, be sure to check out our Buying a Second Home or Home for a Family Member article.

 

father holding two kids in front of his new home, after receiving a gift letter to help fund his down payment

A gift letter can come from your mom, dad, grandfather, grandmother, brother, or sister.

The giftor’s bank doesn’t need to be shown (usually).

When receiving a gift, the lender will need to see the gifted amount in the buyers’ bank account. Usually, they will not require to see the giftors’ bank account statements. However, that being said, the lender can always request to see the amount leaving the giftors’ account. 

This is more the case with a larger gift. 

 

A gift letter is required. 

It is required that you and your family member fill out a gift letter for the lender. The letter is a form from the lender that you, the buyer, are going through. Simply fill out the form with the gift amount, the date the gift was transferred and the giftor and giftee information.

 

A gift is a gift.

When you receive a gift for a down payment, your lawyer, broker and lender cannot hear that the gift is actually a loan and will need to be paid back to the family member. If it is said that it needs to be repaid, this will have to be disclosed to the lender and the gift will not be accepted.

When you receive and accept a gift letter, the gift must be a gift for it to be approved towards your down payment. 

 

How long is a gift letter good for?

A lender can require to see a 90 day history of the buyers’ bank statements. So, if the gift letter and gift are outside of these 90 days, the lender can request further account history with a new gift letter drawn up.

 

Moving money around in the account.

If you receive a gift, it’s very important to keep that money in the account that it was deposited in. If you move money around into different accounts, this can cause more accounts to need a history from for tracking purposes.

For ease on everyone’s part, simply keep the gift in the same account it was deposited in and do not touch it. 

 

Do you have more questions?

If you have more questions on gift letters, please reach out to me today! I’d be happy to discuss your situation and advise you on your next steps. And, once you’re ready, find the best rate for you. Contact me today and let’s get started on your mortgage journey together.

 


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