Many parents want to help their adult children buy their first home, but gifting a down payment isn’t always financially possible. Retirement savings, future medical expenses, and simply the need to maintain a safety net can make giving away a large sum of money unrealistic.

That doesn’t mean helping your child into homeownership is off the table. One alternative is to loan them the down payment instead of gifting it outright. This is a legitimate, lender-accepted option in Canada, provided it’s done with proper legal documentation.

With a family loan, the terms are flexible. You can choose to set an interest rate or offer the loan interest-free. The repayment schedule can be monthly, annually, or even postponed until the home is sold. The important part is that the agreement is clearly written, signed by all parties, and reviewed by a lawyer to ensure it meets lender requirements.

Why a Loan Instead of a Gift Can Make Sense

For many parents in or approaching retirement, a family loan allows them to assist their children without permanently parting with their funds. The money remains an asset that can be returned over time, preserving financial stability. This approach also provides flexibility—parents can keep the repayment terms manageable or even defer repayment until it’s convenient.

From the child’s perspective, a family loan can make a significant difference in their mortgage. For example, if they have 10% saved, the loan could increase their down payment to 20%, eliminating default insurance premiums and lowering monthly payments.

How Lenders View It

When a down payment comes from a family loan, lenders treat it as debt. This means the agreed repayment amount, interest rate, and schedule will be factored into the child’s debt service ratios during mortgage qualification. This is why the written contract is so important: it provides clarity for both the lender and the family.

The Role of Rewind Mortgage

At Rewind Mortgage, Peter Fabry often facilitates these conversations. It’s not just about making the loan work on paper, it’s about ensuring both generations are comfortable with the arrangement. This often involves family meetings where everyone’s questions are answered, the numbers are reviewed, and the long-term plan is clear.

In some cases, parents choose to combine a family loan with other strategies, such as reverse mortgages, to maintain their own financial independence while still providing the needed funds. This ensures that helping a child buy a home doesn’t compromise the parent’s ability to live comfortably in retirement.

If you’re considering loaning a down payment to your adult child, the key is preparation. With a properly structured agreement, open communication, and the right mortgage guidance, it can be a safe, effective way to support their homeownership goals.

Contact Rewind Mortgage today at (289) 312-6333 or [email protected] to speak with Peter Fabry about setting up a family loan for a down payment that works for everyone involved.

Rewind Mortgage is dedicated to seniors’ financial independence. Under Peter Fabry’s leadership, we blend empathetic service with creative mortgage solutions to help you enjoy life on your terms.