Helping Your Child Buy Their First Home | Quebec Guide

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With real estate prices in Quebec making homeownership more difficult for young buyers, many parents are looking for ways to help their children enter the market. Several options exist, each with distinct mortgage and tax implications. A down payment gift is the most common method: Canadian lenders accept gifts from immédiate family members (parents, grandparents, siblings) provided a gift letter confirming no repayment is expected is supplied. The Canada Revenue Agency (CRA) does not tax gifts between family members, and there is no limit to the amount that can be gifted in Canada. Co-signing means the parent becomes a co-borrower or guarantor on the child's mortgage. The parent is then fully responsible for repayment if the child defaults, and the debt will appear on their own credit report, affecting their borrowing capacity for other projects. A family loan is an option where the parent lends funds directly to the child. Lenders generally require that this loan be disclosed and that payments be included in calculating the child's debt service ratios. The First Home Savings Account (FHSA), introduced in 2023, allows the child to save up to $8,000 per year (lifetime maximum of $40,000) with a tax deduction, and withdrawals for purchasing a qualifying first home are tax-free. The Home Buyers' Plan (HBP) allows withdrawal of up to $60,000 from an RRSP for a first home purchase, repayable over 15 years.

Helping Your Child Become a Homeowner: Options in Quebec

Access to homeownership has become a significant challenge for the younger generation in Quebec. According to data from the Association professionnelle des courtiers immobiliers du Quebec (APCIQ), median property prices have risen considerably in recent years, making the initial down payment particularly difficult to accumulate. Many parents want to help their children, but each available option carries financial and legal implications that must be well understood.

The Down Payment Gift

A gift is the simplest and most common method. In Canada, there is no tax on gifts between individuals, unlike in the United States. You can give any amount to your child without direct tax consequences. Lenders and mortgage insurers (CMHC, Sagen, Canada Guaranty) accept gifts from immédiate family as a down payment but require a signed gift letter from the donor. This letter must confirm the gift amount, the family relationship, and the fact that no repayment is expected.

Co-Signing and Guaranteeing

If your child does not have sufficient income to qualify alone, you can co-sign the mortgage as a co-borrower or act as a guarantor. As a co-borrower, you are listed on the mortgage deed and jointly liable for the entire loan. As a guarantor, you commit to covering payments in case your child defaults, without necessarily being listed on the property title. In both cases, the debt appears on your credit report and reduces your own borrowing capacity for other mortgage projects.

Government Programs

FHSA (First Home Savings Account): allows saving up to $8,000 per year (lifetime maximum $40,000) with a tax deduction, tax-free withdrawals for a qualifying first home purchase
HBP (Home Buyers' Plan): tax-free withdrawal of up to $60,000 from an RRSP for a first home purchase, repayable over 15 years starting in the second year after withdrawal
First-Time Home Buyers' Tax Credit (fédéral): non-refundable credit of $10,000 (worth $1,500 in tax reduction at the 15% rate)
First-Time Home Buyer Incentive: check current availability of this program with CMHC, as its terms have evolved since its launch

The Family Loan: Proceed With Caution

A family loan involves advancing funds to your child with a repayment agreement. Unlike a gift, lenders consider this amount as a debt the child must repay. Estimated monthly payments on the family loan are included in calculating the child's TDS ratio, reducing the mortgage amount they qualify for. Furthermore, borrowed funds are generally not accepted as a down payment by mortgage insurers (CMHC, Sagen, Canada Guaranty). If you choose this route, have a notarized loan agreement drafted to protect both parties and clarify repayment conditions.

Frequently Asked Questions

Do I have to pay tax on a down payment gift in Canada?

No. In Canada, there is no tax on gifts between individuals, unlike in the United States. A parent can give any amount to their child for a property purchase without tax consequences. However, the lender will require a signed gift letter from the donor confirming the money is a pure gift with no repayment obligation.

What are the risks of co-signing my child's mortgage?

By co-signing, you become jointly liable for the entire loan. The debt appears on your credit report and is included in your debt service ratios, reducing your own borrowing capacity. If your child defaults, the lender can pursue you for the full amount. Your credit score will also be affected by any late payments.

Is a family loan accepted as a down payment?

Generally no. Most lenders and mortgage insurers (CMHC, Sagen, Canada Guaranty) do not accept borrowed funds as a down payment. The monthly payments on the family loan are, however, added to the borrower's debts in calculating the TDS ratio, reducing the eligible mortgage amount.

How does the FHSA work to help my child?

The FHSA allows your child to save up to $8,000 per year ($40,000 lifetime) with a tax deduction. Withdrawals for purchasing a qualifying first home are tax-free. A parent can also contribute to the child's FHSA, but only the account holder will receive the tax deduction. The FHSA can be combined with the HBP.

Can I use my HELOC to help my child?

Technically yes, but funds from a line of credit are not accepted as a down payment by lenders. They are considered borrowed funds. If you have the cash available separately, you can gift your own savings while using your HELOC for your other needs.

Has the HBP changed recently?

Yes. The Home Buyers' Plan (HBP) withdrawal limit was increased to $60,000 (from $35,000 previously) in the 2024 fédéral budget. The repayment period remains 15 years, starting in the second year following withdrawal. Each eligible spouse can withdraw up to $60,000 from their own RRSP.