Gift Of Equity

AAA

DEFINITION of 'Gift Of Equity'

The sale of a home made to a family member or someone with whom the seller has had a previous relationship, at a price below the current market value. The difference between the actual sales price and the market value of the home is called the gift of equity. Most lenders allow the gift to count as a down payment on the home.

INVESTOPEDIA EXPLAINS 'Gift Of Equity'

A gift of equity requires a gift of equity letter that is signed by both the seller and the buyer. A gift of equity can have tax consequences, as it could impact the asset's cost basis for the new homeowner and have capital gains implications for the seller.
RELATED TERMS
  1. Gift Letter

    Written correspondence to a lender stating that money received ...
  2. Unilateral Transfer

    An economic transactions between residents of two nations over ...
  3. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  4. Cost Basis

    1. The original value of an asset for tax purposes (usually the ...
  5. Home Equity

    The value of ownership built up in a home or property that represents ...
  6. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
Related Articles
  1. How Mortgage Refinancing Affects Your ...
    Credit & Loans

    How Mortgage Refinancing Affects Your ...

  2. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  3. Getting A Loan Without Your Parents
    Retirement

    Getting A Loan Without Your Parents

  4. Rolling Over Company Stock: A Decision ...
    Retirement

    Rolling Over Company Stock: A Decision ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center