A gift letter confirms that money used for a down payment; let’s say for a mortgage is gift money and not borrowed money. The donor has to write a letter to the recipient’s mortgage bank to indicate the source of the funds and that the recipient has no obligation to repay the money.
In most cases, an individual can receive gift money from their relatives or friends to finance their mortgage down payment. Both the recipient and donor of the gift money must sign the letter. Before deciding to use gift money for your down payment, you should check for the rule and regulations of gift money from your mortgage lender.
If you feel you lack the words when writing such a letter, use template or sample letter to understand how you should write the letter.
Why might the lender ask for gift letter?
When you are purchasing a property using gift money, your mortgage lender needs to confirm the source of the money. In such a case they will request a gift letter from your donor to find out the source of your deposit.
Sometimes, the mortgage lender might request for a bank statement from the donor besides the gift letter. The letter spells out you are not indebted to the donor.
Important elements of a gift letter
- The name of the donor and their contacts.
- The relationship between the donor and the recipient
- Amount of the gift money extended by the donor
- An affirmation that the recipient has no obligation repaying the money
- The location of the property the money is intended to purchase
Gift Letter Format
To whom it may concern,I confirm that I am extending a gift of (amount) to (recipients name) to purchase a property at (location).
(Recipients name) is my (relationship).
Kindly note that (recipient) has no obligation to repay the money in either cash or kind.
The gift is originating from (indicate the bank, account name and number).
You can contact me if in need of more information.
(Signature of the donor)
(Name of the donor)
(Address of the donor)
Sample Gift Letter/Email
255 Nassau St,
Princeton NJ 08540
To whom it may concern
I write this letter to confirm that I have advanced a gift of $7000 to my nephew Steve Adams for the purchase the house 1694 Mt Everest lane, Toms River NJ 08730.
Since it’s a gift Adams has no obligation to repay the money in any way, neither will I claim a repayment.
This gift comes from my Provident bank Wall township branch account number 2233 445 667.
Donors name (………) signature (…………..) date (…………)
Recipients name (……….) Signature (………….) date (………….)
Types of Gift Letter
Money gift letter from parents
A money gift letter from parents confirms that a parent has issued a gift their son or daughter to finance the purchase of a property. When writing the letter include;
- The amount of money
- A declaration the donor won’t repay in any way
- Name of the beneficiary
Gift letter for income purposes
A gift letter for income purposes discloses the amount of money you have issued as gifts to your friends or relatives. You need to beware of the gift free tax limit if not consult your financial advisor for details. In writing the letter, these details should be in the letter;
- Gifts issued
- Names of beneficiaries
- Tax Paid
Mortgage gift letter
A donor writes a mortgage gift letter to the mortgage lender of the recipient to explain they have issued a gift to the individual and not a loan. The letter proves to the mortgage lender that the person isn’t incurring more debts to secure a mortgage. In the letter include these details;
- Amount of the gift
- Address of the house to purchase
- Date the gift was issued
- The relationship between the donor and recipient
- A declaration that the donor will not need repayment