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