What’s a Gift Letter for a Mortgage?

Dated: October 3 2020

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What’s a Gift Letter for a Mortgage?

What’s a gift letter?

A gift letter for a mortgage is a document that helps you, the borrower, show the lender that your gifted down payment funds are from legit sources who have a relationship with you, and that the money you’ve received is not ill-gotten gains. The letter also ensures that the funds aren’t a loan, and you don’t have to pay them back.

What’s included in it?

The letter identifies the giver and their relationship to you, specifies the amount of the gift, and notes the financial means that enable the giver to gift the funds—with bank statements as proof. The gift letter should also specify how the financial gift is to be used, as well as the address of the home the recipient is buying. The giver should also note that the money won’t have to be paid back. (If you were to have to pay the money back your lender would have to factor in the repayment to see if you’d still qualify for the loan).

The giver should also specify that they won’t place a lien on your potential property, or make a claim to it, despite their contribution to its purchase.

How should the letter be composed?

Your lender may have a template you’re required to use, so ask them before crafting a letter from scratch.

Is there a cap on how much money you can receive?

Although there aren’t many rules that limit how much money you can be gifted, the giver should take tax implications into account.

The IRS specifies that an individual can gift up to $15,000 without facing any tax penalties. Through a tax rule called “gift splitting” married couples are permitted to gift as much as $30,000 to an individual without liability. Any gift over those amounts can be subject to a gift tax.

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Chip Boyer

Chip is the IT Manager for Alex MacWilliam Real Estate. He handles the technology needs of the company as well as helping agents in their day to day problem solving.....

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