Down Payment in Ontario: Acceptable Sources, Proof You’ll Need, and the Right Way to Handle Gift Letters

Your offer can be perfect—but the deal stalls if the down payment can’t be verified. This post keeps it simple: what counts as an acceptable source, how to prove it, and how to avoid last-minute delays.

Acceptable down payment sources (most lenders)

• Personal savings/chequing — Show account history to confirm funds and build-up over time.
• RRSP (Home Buyers’ Plan) — Withdraw up to the program limit if eligible; show RRSP statement and HBP withdrawal confirmation.
• Gift from an immediate family member — Use your lender’s official gift letter form (details below) and show funds arriving in your account.
• Proceeds from the sale of another property — Provide the firm sale agreement and lawyer’s statement of adjustments.
• Sale of a personal asset (e.g., vehicle) — Provide proof of ownership, sale receipt/bill of sale, and deposit trail.
• Employment bonus/RSUs matured — Provide pay advice or vesting statement and deposit trail.
• Inheritance — Provide estate documentation and deposit trail.

Note: Lenders need to see a clear paper trail. Large cash deposits without documentation are usually not acceptable.

What’s often not acceptable (or needs seasoning)

• Undocumented cash without receipts or history.
• Borrowed funds not disclosed (e.g., a private IOU). If borrowed, the payment usually must be included in debt ratios.
• Unverifiable crypto proceeds — Many lenders won’t accept unless converted and seasoned with full documentation.
• Third-party gifts from non-family, or gifts with strings attached (repayable).

The “90-day history” rule of thumb

Expect lenders to request 90 days of bank/statement history for any account contributing to your down payment. If there are big deposits, include a note and documents that explain the source. Clear trails = faster approvals.

How to document each source (quick checklist)

• Savings: 90 days of statements (PDFs), showing your name, account number, running balance.
• Gift: We will supply your lender’s official gift letter form. Upload the signed form, proof of transfer (e-transfer/wire/receipt), and your statement snapshot after funds arrive.
• RRSP/HBP: RRSP statement showing balance + HBP withdrawal confirmation.
• Property sale: Firm Agreement of Purchase and Sale + lawyer’s statement of adjustments on closing.
• Asset sale: Proof of ownership + bill of sale + deposit proof.
• Inheritance: Executor/estate letter + deposit proof.

Gift letter: use your lender’s form (what it includes)

Most lenders require their own official gift letter. We’ll provide the correct form once your file is submitted. The donor (e.g., a parent) completes and signs it, and you’ll provide proof that the funds arrived in your account.

What lender gift letters usually include:

• Donor’s full name and contact details
• Recipient/buyer’s full name
• Relationship to the buyer (e.g., parent, sibling, grandparent)
• Gift amount (CAD) and date of transfer
• Property address (if known)
• Non-repayable statement (no lien, no interest, no expectation of repayment)
• Signatures and dates (donor and recipient)

You’ll also upload: a receipt/screenshot of the transfer (e-transfer, wire, or bank receipt) and an updated statement showing the deposit in your account.

Tip: Move gift funds a little early (ideally 2–3 weeks before closing) to avoid bank holds and last-minute delays.

Timing tips (so nothing derails on closing)

• Move funds early (especially gifts and RRSP withdrawals) to avoid bank holds.
• Keep accounts stable near approval/closing—avoid large unexplained transfers.
• Use the same names across documents (no nicknames) and ensure addresses match ID where possible.
• Screenshot rules: When sending screenshots, include your name, account number (partially masked is fine), dates, and running balance.

Mini-FAQ

Do I need 20% down? No. Many first-time buyers use less than 20% down with an insured mortgage. We’ll weigh pros/cons for your situation.

Can I combine multiple sources? Yes—just document each source and keep the trail clean.

Is a gift taxable? In Canada, gifts aren’t typically taxed to the recipient, but always consult your own tax advisor for your circumstances.

Will a gift affect my approval? Gifts are commonly accepted for down payments. Lenders still assess income, credit, and the property.

Next steps (fast and friendly)

First-Time Buyer Mortgage Guide (Ontario): A Clear 7-Step Path

Buying your first home is exciting—and confusing. You’ll see new terms, lots of documents, and a flood of opinions. This guide is the simple version: what matters, what doesn’t, and how to move from “curious” to “keys in hand.”

What you’ll get here: A plain-English overview of the mortgage journey in Ontario, plus a quick checklist and answers to the questions I hear most. No rate spam, no hype.

1) Clarify your goal and timeline

Decide your must-haves (location, bedrooms, commute) and your when (e.g., “within 3–6 months”). This helps align pre-approval limits, closing dates, and how long your rate hold needs to cover.

2) Know the numbers that actually matter

• Down payment: Save what you can; lenders mainly care that it’s proven and from acceptable sources (e.g., savings, eligible gifts).
• Monthly comfort zone: Work backward from a payment you can live with year-round, not a max.
• Debt picture: Lower balances and clean, on-time payments help your overall qualification.

Quick tip: Before you shop, pull your own credit report and fix obvious issues (old addresses, errors). Small fixes can improve terms.

3) Get a real pre-approval (not just a calculator result)

A genuine pre-approval reviews income, liabilities, and down payment documents and can hold a rate for a period of time. It prevents surprises when you make an offer and helps your Realtor negotiate with confidence.

Have ready:

• Government ID
• Recent pay info (or business financials if self-employed)
• Down payment history (bank statements / gift letter if applicable)
• Summary of liabilities (cards, loans, lines of credit)

4) Shop homes with your numbers in mind

Share your maximum and your comfortable target with your Realtor. Ask them to flag properties with things that can impact financing (e.g., legal vs. non-legal basement suites, condo special assessments, unusual property types).

5) Offer accepted? Move fast on the mortgage file

Submit the purchase agreement and MLS listing right away. Your lender will confirm income, review property details, and—if needed—order an appraisal. Respond quickly to any document requests to keep closing on schedule.

6) Lawyer & closing day checklist

Your lawyer will handle title searches, tax adjustments, and closing funds. You’ll bring ID, insurance info, and any remaining down payment/closing funds as directed. I coordinate with your lawyer so funds arrive on time.

7) After you get the keys

Set up auto-payments, keep an eye on prepayment options, and plan a reminder to review your mortgage well before renewal. Good mortgage strategy continues after closing.

Mini-FAQ

Do I need 20% down? Not always. Many first-time buyers purchase with less than 20% down using an insured mortgage. The “right” down payment balances cash flow, emergency savings, and long-term plans. (We’ll tailor this to you.)

What’s the “stress test” about? Lenders must qualify you at a higher test rate than your contract rate. It’s there to ensure you can handle payment changes. I’ll translate how it applies to your file in plain numbers.

Will a gift from family work? Often, yes—if it’s properly documented with a signed gift letter and funds are traceable. I’ll give you the exact wording/template and timing.

I’m self-employed—am I out of luck? Not at all. Lenders look at income differently. We’ll build a file that reflects your real income picture using the right documentation.

How long does a pre-approval last? Typically long enough to shop comfortably; we can refresh it if timelines shift.

What to do next

Serving Markham/Unionville and clients across Ontario.

About me

I’m Man Fung, Mortgage Agent Level 1 with Caliber Mortgage Inc. I help first-time buyers make smart, confident decisions—without jargon.