Gift of Equity Calculator
Comparator: With vs Without Gift of Equity
Compare LTV and cash down-payment needs for the same mortgage amount, with and without the equity gift.
Descriptive Completeness Check
A descriptive checklist for preparing gift of equity documents. This is not a creditworthiness assessment and not legal advice.
This check’s results are descriptive and educational, not legal, tax, or financial advice, and not a guarantee of loan approval.
Frequently Asked Questions about Gift of Equity
What is a gift of equity?
A gift of equity is when a property seller gives part of the property’s equity to the buyer in place of a cash down payment. This is common in transactions between family members: the sale price is recorded in full, then the gift value is subtracted so the buyer acquires the property at a lower effective purchase price. Example: a Rp500 million home with a 10% gift of equity (Rp50 million) means the buyer’s effective purchase price is Rp450 million.
How does a gift of equity differ from an ordinary price discount?
With an ordinary discount, the seller lowers the sale price recorded in the transaction. With a gift of equity, the sale price is still recorded in full, but the difference is treated as an equity contribution from the seller to the buyer. The recording and documentation differ, so lenders assess it differently from a mere price reduction.
How does a gift of equity work in a mortgage application?
The gift value is computed from the sale price times the gift percent, or set as a fixed amount. This gift reduces the cash down payment the buyer must prepare to reach a given down-payment target. Lenders generally still use the sale price, not the effective purchase price, as the property valuation basis — confirm this with your lender. For international context: in the United States, the FHA handbook (HUD 4000.1) defines a gift as a cash or equity contribution with no expected repayment, and family members count as acceptable donors (spot-checked October 9, 2026); rules in other countries and per lender may differ.
Is LTV calculated from the sale price or the effective purchase price?
Both are informative and this calculator shows both. LTV against the sale price is the mortgage amount divided by the sale price — the basis commonly used in loan application assessments. LTV against the effective purchase price is the mortgage amount divided by (sale price minus gift). Example: a Rp400 million mortgage on a Rp500 million home gives 80% LTV against the sale price, but 88.89% against the Rp450 million effective purchase price.
What is a gift letter?
A gift letter is a written statement from the donor declaring that the funds or equity given are a gift, not a loan, and do not need to be repaid. Lenders generally request it as supporting documentation for the mortgage application. Ask your lender which letter format is accepted, as requirements vary.
Is a gift of equity taxable?
Tax treatment of property gifts varies by country and jurisdiction, and may touch gift-tax or income-tax rules depending on the parties involved and the transaction structure. The information on this page is general and educational, not tax advice — consult a tax or legal professional in your area before transacting.
How does a gift of equity differ from an ordinary down payment?
An ordinary down payment is paid in cash by the buyer from their own funds. A gift of equity is an equity contribution from the seller counted as part of the buyer’s contribution, reducing the cash needed. Example: a 20% down-payment target on Rp500 million is Rp100 million; with a Rp50 million gift of equity, the cash the buyer still needs to prepare is Rp50 million.
FAQ answers are general information and educational, not legal, tax, or financial advice. For transaction decisions, consult a licensed professional in your area.