Define: Gift Of Equity

A gift of equity refers to the transfer of ownership interest in a property from one party to another at a price below the property’s current market value or without any monetary consideration at all. In such transactions, the seller (often a family member) may gift a portion of the property’s equity to the buyer, typically to assist them with the purchase or to facilitate the transfer of property within a family. This equity gift can serve as part or all of the buyer’s down payment on the property. Gift of equity transactions may involve legal and tax considerations, and it’s essential for both parties to consult with legal and financial professionals to ensure compliance with relevant laws and regulations.

Selling a home to a family member or someone else with whom the seller has a close relationship at a price lower than its market value. The gift of equity is the difference between what the house sells for and its actual market value. Most lenders typically let the gift count as the down payment.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

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