DEFINITION of ‘Gift Letter’
Written correspondence to a lender stating that money received from a friend or relative is a gift. Gift letters typically come into play when a borrower has received assistance in making a down payment on a new home or other real estate property. Such letters also explicitly state that the money received is not expected to be paid back in any way, shape or form.
BREAKING DOWN ‘Gift Letter’
Gift letters are important because, in general, lenders tend to frown upon borrowers using additional borrowed money for a down payment on a home or other property. “Gifted” money, however, is a different story. This is why the letter must reference the fact that the money is, in fact, a gift and not a loan. Furthermore, the letter must be written by the gift giver to have any validity. One’s relationship with the receiver is also disclosed in most gift letters.