Parents Helping Kids Buy a First Home in Canada

In 2026, the average home price in Canada sits around $680,000 — and in Toronto and Vancouver, it's well over $1 million. For most young Canadians, the 20% down payment alone ($136,000 on an average home) represents years of aggressive saving. It's no surprise that the "Bank of Mom and Dad" has become one of the largest mortgage lenders in the country.

CIBC Economics estimated that in 2024, 31% of first-time homebuyers received financial help from family, with an average gift of $115,000. If you're a parent thinking about helping your child buy their first home — or a young buyer hoping your parents might help — this guide covers every strategy, risk, and tax implication.

Strategy #1: The FHSA (First Home Savings Account)

The FHSA is the best tool in the Canadian tax code for first-time home buyers — and parents can turbocharge it by providing the funds to max it out.

How the FHSA Works

• Contribution limit: $8,000/year, $40,000 lifetime
• Tax deduction: Contributions are tax-deductible (like an RRSP)
• Tax-free growth: Investments grow tax-free inside the account
• Tax-free withdrawal: For a qualifying first home purchase — no repayment required
• Carry-forward: Up to $8,000 of unused room carries forward (max contribution $16,000 in a single year)
• Time limit: Account must be used within 15 years of opening, or by December 31 of the year you turn 71

The Parent Strategy

Parents can give their child cash to contribute to their own FHSA. The child gets the tax deduction, the tax-free growth, and the tax-free withdrawal. There's no attribution rule issue because the child is the account holder and contributor.

Strategy #2: Gifted Down Payments

The most straightforward approach: parents give their child cash for the down payment. Canada has no gift tax, so there's no tax consequence to the parents for giving money.

What Lenders Require

• A signed gift letter from the parents stating: the amount, that it's a genuine gift, and that no repayment is expected or required
• Proof that the funds have been in the parents' account for at least 90 days (or a paper trail showing the source)
• The gift must be from an immediate family member (parent, sibling, grandparent) — gifts from friends or distant relatives may not be accepted
• Some lenders require the child to have some of their own savings in addition to the gift (e.g., 5% from their own funds)

Tax Implications of Gifting

• No gift tax for the parents (Canada doesn't have a gift tax)
• No income tax for the child receiving the gift
• Attribution rules don't apply for adult children (unlike spousal gifts)
• If parents sell investments to fund the gift, they may trigger capital gains tax on those investments

Strategy #3: Co-signing the Mortgage (Proceed With Caution)

If your child doesn't qualify for a mortgage on their own income, a parent can co-sign — adding their income and credit to the application. This is the riskiest strategy on this list.

What Co-signing Means

• You are equally liable for the entire mortgage. If your child misses payments, the lender comes after you — not as a backup, but as a primary obligor
• The mortgage appears on your credit report and counts against your borrowing capacity
• You cannot remove yourself from the mortgage without refinancing (which requires your child to qualify alone)
• If your child defaults, your credit score is destroyed and you may have to make payments on a home you don't own or live in

When Co-signing Might Make Sense

• Your child has stable income but insufficient credit history (e.g., newcomer to Canada, recent graduate)
• The mortgage amount is conservative relative to your child's income (they could realistically make payments alone)
• You have a clear timeline for removal (e.g., "we'll refinance in 2 years once your credit is established")
• You've had an honest conversation about what happens if things go wrong

Strategy #4: The Home Buyers' Plan (HBP)

The HBP allows first-time buyers to withdraw up to $60,000 from their RRSP (per person, $120,000 for a couple) tax-free to buy a home. It must be repaid over 15 years.

How Parents Can Help

Parents can give their adult child money to contribute to their RRSP, then the child withdraws under the HBP. The child gets the RRSP tax deduction today and the tax-free withdrawal for the home purchase.

HBP Rules to Know

• RRSP contributions must have been in the account for at least 90 days before withdrawal
• Repayment begins the second year after withdrawal — 1/15th per year for 15 years
• Missed repayments are added to your taxable income for that year
• You must be a first-time buyer (haven't owned a home in the last 4 years)

Strategy #5: Private Family Lending

If parents want their money back eventually but want to help with the purchase, a formal family loan can work — but it must be structured correctly.

Key Considerations

• Lenders will count it as debt: If the mortgage lender knows about the family loan, it affects your child's debt-to-income ratio and may reduce the mortgage they qualify for
• Put it in writing: A promissory note with repayment terms protects both parties and prevents family disputes
• Interest-free is fine: Canada doesn't require charging interest on family loans (no attribution rules for adult children)
• Consider a second mortgage: For large amounts, registering a second mortgage gives the parents legal security but adds complexity

Tax Implications for Parents

Selling Investments to Fund the Gift

If parents sell stocks, ETFs, or investment properties to raise cash for the down payment gift, they'll trigger capital gains tax. Plan the timing carefully — spreading dispositions across two tax years can keep more gains at the 50% inclusion rate ($250K annual threshold).

RRIF Withdrawals

Parents withdrawing from a RRIF to help fund a down payment face full income tax on the withdrawal. A $100,000 RRIF withdrawal could result in $35,000–$45,000 in tax depending on province and other income. Plus, it may trigger OAS clawback.

Using HELOC on Your Own Home

Borrowing against your own home equity (HELOC) to give your child a down payment gift avoids the tax hit of selling investments, but adds debt to your own balance sheet. At current HELOC rates (~6–7%), a $100,000 HELOC costs $6,000–$7,000/year in interest.

The Family Action Plan

The Bottom Line

Helping your child buy a home is one of the most impactful financial gifts a parent can provide. But the how matters enormously — both for tax efficiency and family relationships.

• Start with the FHSA: It's the single most tax-efficient vehicle for a first home purchase. Open it early, max it yearly
• Layer in the HBP: Combined with the FHSA, a buyer can access $100,000+ in tax-advantaged funds
• Gift the down payment wisely: Get a proper gift letter, ensure 90-day seasoning, and be truthful with the lender
• Think twice before co-signing: Understand you're on the hook for the full mortgage. Have a plan B
• Talk openly about money: The most important thing isn't the strategy — it's having honest family conversations about expectations, timelines, and what happens if things don't go as planned

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Planning your family's home-buying strategy? Use FiggyBank's FHSA Calculator and Mortgage Affordability Calculator to run the numbers.