You may, or may not be familiar with a gift of equity. What is a gift of equity?

Perhaps your child is looking to purchase a home and you are ready to sell your home. Your child has expressed an interest in living in the childhood home instead of you selling it to a third party. but, your child has no money for down payment or closing costs. If your child can qualify for a mortgage, you can gift the equity in the home for the down payment.

Lenders are keen on the non-arms length nature of this transaction, so agreeing to a market price for the home is a good idea. For instance, you can agree to sell the home at the appraised value.

The parents must have enough equity in the home to give. The parents can give the difference between the sales price and the balance on the mortgage. The child’s new mortgage will pay-off the balance of the parents’ mortgage.

The gift of equity is not limited to parents and children, the gift can be made from one family member to another, e.g. brother and sister.

This is an efficient technique to transfer property within the family with little or nothing out-of-pocket.

If you are interested in a gift of equity, contact us and we can help you structure it. We offer a variety of products and services, ask us how we can assist you today. We work for you, not the lender.