Help From Parents for a Down Payment in BC: Gift, Loan or Going on Title?

In Metro Vancouver, many first homes are bought with help from parents. That help can take different legal forms: a gift, a loan, or a parent going on title as a co-owner. Families often decide quickly, with a lender's deadline approaching, and leave the details unwritten.

This article explains the three main options at the time of purchase, what each means for the mortgage, title and property transfer tax, and why putting the arrangement in writing before completion protects both the parents and the buyer.

Three ways parents can help

When parents contribute to a child's home purchase, the money usually takes one of three forms:

• A gift. The money is the child's to keep, with no expectation of repayment.
• A loan. The child owes the money back, on agreed or implied terms, and it may or may not be secured against the home.
• Co-ownership. A parent goes on title, alone or with the child, and holds a share of the property, sometimes only to help the child qualify for a mortgage.

The label matters. It decides what the lender is told, who owns what, how property transfer tax applies, and what happens later if the child separates from a partner or a parent dies. Disputes often arise because the family never decided which one it was.

A gift: the gift letter and the evidence

If the help is a gift, the mortgage lender will usually want written confirmation. CMHC lists a non-repayable financial gift from a relative as a traditional source of down payment for insured mortgages, and lenders commonly ask parents to sign a gift letter confirming that the money does not have to be repaid.

Take that letter seriously. It is a statement to the lender, and it may later be evidence of what everyone intended. Parents should not sign a gift letter if they actually expect to be repaid.

The law does not simply assume that money a parent hands over is a gift. In Pecore v. Pecore, 2007 SCC 17, the Supreme Court of Canada confirmed that, for gratuitous transfers, the general rule is a presumption of resulting trust, and that the presumptions can be rebutted by evidence of the transferor's actual intention on a balance of probabilities. In practice, the documents made at the time often decide what the money was.

If the gift goes to your child alone, BC's Family Law Act can treat it as excluded property in a later separation. Section 85(1)(b.1) excludes gifts to a spouse from a third party, but section 85(2) puts the burden on the spouse claiming the exclusion to prove it. Our article on parental gifts and loans on separation explains how this plays out if a relationship ends.

A loan: tell the lender and write it down

A family loan can make sense when parents need the money back eventually, or want to treat siblings equally. The key points:

• Disclose it to the mortgage lender. A loan is a debt, and lenders take debts into account when approving a mortgage. Describing a loan as a gift is a serious problem.
• Put the terms in writing. A loan agreement or promissory note should say the amount, any interest, when repayment is due and what happens on a sale, separation or death.
• Consider security. Parents can ask for a mortgage registered against the home. The main lender will usually need to know about, and may restrict, any further mortgage on the property.
• Think about the estate. If a parent dies before the loan is repaid, the will should say whether it is forgiven or deducted from the child's inheritance.

Going on title: more than a signature

Some lenders will approve a mortgage only if a parent goes on title or signs as a co-borrower. That brings real consequences:

• The parent is liable on the mortgage. If payments stop, the lender can look to every borrower.
• Ownership needs to be clear. Will the parent hold a real share of the value, or hold title only to help the child qualify? Joint tenancy and tenancy in common work differently on death. Without a written agreement, the question of who beneficially owns the home can end up in court.
• Property transfer tax. The Province's guidance on the first time home buyers' exemption says that if one or more purchasers do not qualify, only the percentage interest of the qualifying first-time buyers is eligible. A parent who has owned a home before will usually reduce the exemption.
• Trust reporting. The Canada Revenue Agency's current guidance says certain bare trusts must file for tax years ending on or after December 31, 2026. It describes an exception where the legal owners are related individuals and the home would be the principal residence of one or more of them, giving a parent on title to help a child obtain a mortgage as an example. Confirm how this applies to your facts with your accountant.
• Tax on the parent's share. If the home is not the parent's own principal residence, a later sale may have income tax consequences for the parent's share.

Our article on adding a child to title covers many of the same risks from the other direction.

Put it in writing before completion

Whatever you choose, record it while everyone agrees and memories are fresh. That may mean a gift letter supported by a short declaration, a loan agreement and mortgage, or a co-ownership agreement setting out each person's share, who pays what, and what happens on a sale, a separation or a death. If your child has a partner, a cohabitation or marriage agreement can also address the family money. Parents should then update their wills so that what was given or lent is treated as they intend among all their children.

Buying with family help? Document it before completion

Our real estate lawyers can review the purchase and mortgage documents, explain how the family contribution will be treated on title, and prepare the documents that record whether it is a gift, a loan or a share of ownership.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.