Define: Gift Letter

A gift letter is a document that confirms the transfer of a gift from one party to another, typically used in real estate transactions where the recipient is receiving funds as a gift for the purpose of a down payment or closing costs. The letter is usually provided by the donor, who verifies that the funds are indeed a gift and not a loan, and that no repayment is expected. In real estate transactions, lenders often require a gift letter to ensure that the recipient’s financial position and ability to repay the mortgage are accurately represented. The letter typically includes details such as the amount of the gift, the donor’s relationship to the recipient, and a statement confirming that the funds do not need to be repaid.

A letter provided to a lender or government agency acknowledging that money to be used, usually for a down payment, is a gift from a relative or friend and carries no obligation for repayment.

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This glossary post was last updated: 29th March 2024.