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Gift of Equity Purchase: How to Sell Your Home to a Relative with No Money Down

February 20, 2023

Downpayment Equity

If you’re considering selling your home to a relative and want to sell it to them at a discount but not give it to them, a gift of equity purchase might be a good option for you.

What is a Gift of Equity?

A gift of equity is a real estate purchase and sale transaction, usually between relatives. It typically involves a parent wanting to gift part of the real estate or “equity” but not all of the property to a child. It’s a great way to buy a home from a relative with no money down.

Here are some benefits of this type of transaction:

  1. Buyers can often get financing with no money down. By using the gift as a down payment and wording the contract correctly, buyers can usually finance the purchase with $0 down.
  2. You can avoid unnecessary transaction fees. By selling the family home to a child or other relative, you can avoid transactional fees associated with finding a house from an unknown party.
  3. You may be able to avoid mortgage insurance. Mortgage insurance (MI) is a premium paid to the lender or insurance company for financing greater than 80% of the purchase price. If the gift of equity is greater than 20%, you can likely avoid paying mortgage insurance.


To accomplish a gift of equity purchase, both the buyer and seller will need to do the following:

  1. Find a lender, like Homestead, that has experience with these types of transactions. A good lender should be able to assist with drawing up the contract to maximize savings, choosing a title company, and managing both sides of the real estate transaction.
  2. Discuss potential tax implications with a tax advisor.
  3. The buyer should fill out an application with the lender to ensure they can qualify for the mortgage.

In conclusion, a gift of equity purchase is a great way to pass wealth from generation to generation when performed by the right lender. Contact our team to learn more.

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