Gift letter for a mortgage

What a mortgage gift letter is

A mortgage gift letter is a written statement from the person giving money toward a home purchase, confirming that the funds are a gift with no expectation of repayment. Lenders ask for it because a down payment made with borrowed money changes the buyer's financial picture. If the money were actually a loan, the buyer would owe a debt the lender did not account for, which affects how much they can safely borrow. The gift letter puts that question to rest.

The person giving the money is usually called the donor, and the buyer is the recipient. Down payment gifts most often come from close family, and many loan programs have rules about who is allowed to give a gift, so it helps to check with the lender before you count on the funds.

Why lenders require a gift letter

Lenders need to know two things: that the money is really a gift, and where it came from. A gift reduces the debt the buyer carries, which is good for the loan. A hidden loan does the opposite. The letter, along with proof of the transfer, lets the lender document the source of the down payment and confirm it does not create a new obligation. This is a normal part of underwriting, not a sign that anything is wrong.

What a gift letter must include

Lenders usually want a gift letter to state the following clearly.

• The donor's name, address, and phone number.
• The relationship between the donor and the buyer, such as parent, grandparent, or sibling.
• The gift amount in dollars.
• A clear statement that the money is a gift and that no repayment is expected or required.
• The property address the gift is going toward, if known.
• The date of the gift or the expected transfer.
• The donor's signature. Some lenders ask the buyer to sign as well.

The lender may also ask for supporting documents, such as a bank statement showing the donor had the funds and a record of the transfer into the buyer's account. Ask your lender for their exact form and requirements, since these vary by lender and loan type.

A simple gift letter template

Fill in the blanks with the real details.

[Date]

To [Lender Name],

I, [Donor Full Name], am giving a gift of [amount] to [Recipient Full Name], who is my [relationship]. These funds are to be used toward the purchase of the property at [Property Address].

This money is a gift. There is no expectation of repayment, and it is not a loan. No part of it needs to be repaid at any time, in cash or by any other means.

Donor name: [Donor Full Name]
Donor address: [Address]
Donor phone: [Phone]
Relationship to recipient: [Relationship]
Gift amount: [Amount]

Donor signature: ______________________ Date: ____________

Fill out a gift letter step by step

1. Get the lender's form. Many lenders provide their own gift letter. Use it if they do, so the wording matches what they need.
2. Enter the donor's details. Full name, address, phone, and the relationship to the buyer.
3. State the amount and the property. Write the exact gift amount and the address the money is going toward, if you have it.
4. Include the no-repayment statement. This is the heart of the letter. Make it clear the money is a gift and never has to be paid back.
5. Sign and date. The donor signs, and the buyer signs too if the lender asks.
6. Attach any proof requested, such as a bank statement or a record of the transfer.

How the gift should be transferred

Lenders like a clear paper trail. A transfer by bank transfer or cheque that can be traced from the donor's account to the buyer's account is easy to document. Large cash deposits with no record are harder to verify and can slow the loan down. Keep copies of the transfer and any statements the lender asks for, and try to move the money in a single, traceable transaction rather than several small ones.

US and Canada notes

Gift letters are used in both countries, and the core idea is the same: confirm the money is a gift, not a loan. The details differ by lender and loan program. In the US, different loan types have their own rules on who can give a gift and how much can be gifted, and there are separate tax rules for the donor around gift reporting. In Canada, lenders similarly ask for a signed gift letter and proof of funds, and the tax treatment of gifts differs from the US. Because both the lending rules and the tax rules vary, ask your lender for their exact requirements, and speak to an accountant if the gift is large.

Does a gift letter have tax consequences?

A gift letter itself is just a statement for the lender, but giving a large sum can have tax implications for the donor depending on where they live and how much they give. The rules are different in the US and Canada, and they change with the amount. This is a question for a tax professional rather than the mortgage lender, so if the gift is substantial, it is worth a short conversation with an accountant before the money moves.

Timing the gift so it does not slow the loan

When the money moves matters almost as much as the letter itself. Lenders like to see the gift arrive and settle before or during the application, with a clear record of where it came from. A few habits keep things smooth. Deposit the gift into the account you will use for the down payment, not scattered across several accounts, so it is easy to trace. Keep the transfer in one traceable transaction rather than breaking it into smaller amounts, which can look like unexplained deposits and prompt extra questions. Hold onto the donor's statement showing they had the funds and your statement showing the money arriving. If the gift lands too close to closing, the lender may need extra time to verify it, so moving it earlier in the process is usually better.

Gift versus loan: why the distinction is strict

Lenders draw a hard line between a gift and a loan because the two have opposite effects on your finances. A gift adds money you do not have to repay, which improves your position. A loan adds a debt and a monthly obligation, which reduces how much mortgage you can safely carry. If a supposed gift is really a loan, the lender's whole calculation is off, and that is a risk they will not accept. This is why the letter must state plainly that no repayment is expected, and why lenders sometimes ask the donor to confirm it directly. Trying to pass a loan off as a gift can jeopardize the mortgage, so if the money genuinely is a loan, it is better to say so and let the lender factor it in.

Fill out and sign a gift letter online

Once you have the lender's form or a template, you can complete and sign it without printing. Open the gift letter as a PDF and fill it in on screen with our fill a PDF tool, typing the names, amount, and property address into the right spots. Add the donor's signature, and the buyer's if needed, with the sign a PDF tool, which lets each person draw, type, or upload a signature. The letter is processed in your browser, so the names, amounts, and bank details stay on your own device.

For other documents that come up when buying a home, browse the form templates library. To keep the signed letter and any supporting statements together for the lender, create a free account and save your files in one place.

Before you send it to the lender

• The letter clearly states the money is a gift with no repayment expected.
• It names the donor, the relationship, the amount, and the property.
• It is signed and dated, with the buyer's signature if the lender requires it.
• You have used the lender's own form if they provided one.
• You have kept proof of the transfer and any statements the lender asked for.

A gift letter is quick to prepare and clears a common hurdle in the mortgage process. State plainly that the money is a gift, keep a clean record of the transfer, and give the lender exactly what they ask for.