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When couples purchase a home together, it's not uncommon for parents or in-laws to pitch in with the down payment. But what happens if the relationship breaks down later? If you're separating or divorcing in Ontario, the question of whether that financial help was a gift or a loan becomes very important.
Here’s what you need to know about how Ontario family law treats this issue—and how it could affect your property division.
Gift or Loan? Why It Matters in a Separation
In family law, the difference between a gift and a loan is crucial. It can affect:
Who gets what share of the home
Whether one spouse owes money back to the in-laws
Equalization of net family property
If the money was a gift, it may be considered part of the couple’s joint property (especially if the home is the matrimonial home). If it was a loan, it may be treated as a joint debt, reducing the total value of the property to be divided.
How Does Ontario Law Decide If It Was a Gift or a Loan?
Ontario family courts look at evidence to decide whether the down payment was intended as a gift or a loan. The courts will consider factors such as:
Was there a written agreement or promissory note?
Were any repayments made?
Was interest charged?
What was the relationship between the parties?
Was there an expectation of repayment?
Simply saying "it was a loan" isn’t enough. The burden of proof is on the person claiming it was a loan to show that repayment was expected.
Common Scenarios in Ontario Separations
If the Down Payment Was a Gift:
The money is treated as part of the couple's joint property.
The value of the matrimonial home is usually shared equally, regardless of who paid what.
If the Down Payment Was a Loan:
It may be listed as a liability in the net family property calculation.
Both spouses may be equally responsible for repaying it—unless otherwise agreed.
What If the Money Came from One Spouse’s Parents?
This is especially tricky. Ontario law often assumes money from a parent to their child is a gift unless proven otherwise. So if your in-laws helped with the down payment, and there’s no loan documentation, the court may presume it was a gift to both spouses—even if your name wasn’t on the property title.
If you're the spouse whose parents gave the money, it’s important to show clear evidence of the intent to loan, not gift.
What Can You Do to Protect Yourself?
Get It in Writing
If your parents or in-laws are providing money, a written loan agreement signed by all parties is the best protection.
Keep Records
Save e-transfers, bank records, and any communication about repayment.
Address It in a Cohabitation or Marriage Agreement
Outline how down payments or family contributions will be treated during separation.
Jessica Luong is the founder and principal lawyer of J. Luong Law, a boutique family law firm with offices in Toronto and Windsor, Ontario. With experience in both courtroom advocacy and out-of-court negotiation, she offers a comprehensive approach to resolving complex family law matters. Jessica is recognized for her skill in combining strong advocacy with a client-centered approach, ensuring that her clients’ needs and best interests are always at the forefront. She can be reached by phone at (226) 256-9988 or by email at Jessica@jluonglaw.com
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