Home and property · British Columbia
Gift letter for a lender, with a lawyer behind it.
A gift letter is a short signed letter from a family member telling a mortgage lender that money toward a home down payment is a true gift, with nothing to be paid back.
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What a gift letter is
A gift letter is signed by the person giving the money, called the donor. It tells the buyer's mortgage lender that the money is a gift and not a loan. It usually names the donor and how they are related to the buyer, the amount, and where the money is and when it moves. It says what home the money is for. It says nothing is to be repaid, no interest is charged, and the donor gets no share of the home.
No law sets the wording. What goes in comes from what lenders and mortgage insurers check. Some lenders have their own gift form and may ask the donor to sign it as well. No law requires a gift letter to be witnessed.
Why you'd need one
Lenders check where a down payment comes from. When part of it is a gift, they usually ask for a letter from the giver. Mortgage insurers generally accept a gift from a close family member, such as a parent or grandparent. They want to know the gift is not repayable and that the donor has no financial interest in the purchase.
The letter can also matter under British Columbia family law. A gift to one spouse from a third party is generally excluded property, which is generally not divided if the couple separates. The letter says whether the gift is to the buyer alone or to the buyer and a co-buyer together. Any growth in the gift's value can still be shared.
When to see a lawyer instead
A gift letter is for a true gift of money. It does not fit a loan, including an interest-free or forgivable loan. It does not fit a donor who will own part of the home, hold a mortgage on it or expect a share of it. A gift letter is also not the tool if the gift is not money, or if the donor is a company rather than a person.
Talk to a lawyer if someone is signing for the donor under a power of attorney, if you are worried about a donor's understanding or about pressure on a donor, or if you want a written agreement between spouses about the gift.