What is a Gift Of Equity Purchase?
A gift of equity purchase is a great option for someone who wants to sell their house to someone in their immediate family (brother, sister,son, daughter, etc.)
How Do Gift Of Equity Purchase Work?
Whenever you purchase a house, if you are not doing a VA or FHA loan you always have to put a 10 - 20% down payment. However when you do a gift of equity purchase, the family member you are selling the house to can finance the whole purchase price without putting any money down. The person selling the home, however, is only able to sell it to his immediate family member for 80% of the appraised value of the home. The remaining 20% of the equity is then given as a gift to the immediate family member. All closing costs with the exception to the appraisal can be financed into the loan.
Gift of Equity Example:
Let's say your house is paid off and is worth $300,000. The maximum you would be able to sell the home for is $240,000. The remaining $60,000 that is not being financed is gifted to your family member. Or to put it plainly they are buying a house that will already have equity in it Now let's assume that the closing costs are $3,000. When the loan records you would walk away with $237,000. Equally important is that your immediate family member was able to finance their new home without putting any money down and with the exception to the appraisal, incurred no additional out of pocket expense. Oh and another great fact about the gift of equity program, you do not need a real estate agent. That's right, you can spare yourself having to pay the additional fees. Which in this example would be $14,400, assuming you had to pay the standard 6% fee.
Why would I want to sell my home for only 80% of what it's worth?
This program is not for everyone. It's really just a viable option for someone who wants to sell there home at a cheaper price to their family member for their own specific reasons.
Contact us or Give us a call today (808) 728-9999 and we would be more than happy to answer any other questions you may have, and see if the Gift of Equity purchase is the right fit for you.
