We are often asked to receive a Gift Letter as part of our client’s transactions in buying or refinancing a home. This is straightforward enough…
Until we hear the dreaded words “The Agent said I needed to write a gift letter, but we’ll figure out paying me back later.”
Oh no. No, no. No, no, no, no.
Gift or Loan? Know the Difference!
Whether it’s a gift or a loan can make a big difference—especially if things go sideways later.
Gift = No strings attached. You’re giving it freely, with no expectation of being paid back. You will never see this money again.
Loan = You expect it to be repaid—ideally with clear terms and a written agreement. You want this money back one day.
Why it matters: If there’s ever a dispute (divorce, estate issues, divorce, bankruptcy, or other financial fallout), the difference between a gift and a loan can become very important.
It’s also very important that you Not Commit Mortgage Fraud. I cannot stress this enough. Lying to a mortgage lender can have serious long term legal implications for everyone involved!
Pro tip: If you’re lending money, put it in writing. If it’s a gift, say so clearly—especially if it involves family, and forget any idea of getting repaid.
Need help documenting it properly? We’ve got your back.
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