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Gift of Equity

Mortgage Hack #15

How it works: A gift of equity typically occurs when a family member has built up equity in their home and sells it to a relative (children, grandchildren, etc.). They use the built-up equity to “gift” some or all of the down payment and/or closing costs towards the purchase. This is a way to use equity to benefit the new homeowners, instead of giving a “discount” on the purchase price.

Benefit to Buyers:

  • Buyers can purchase a home for less than market value

  • Buyers will have immediate access to more equity

  • Buyers can keep cash reserves for home improvements, paying off other debts, etc.

Benefit to Sellers:

  • Home does not have to go ‘on the market’

  • Sellers do not have to arrange for staging or home showings.

Reference: 2022 Keller Mortgage LLC

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