Gift of Equity Calculator

The gift of equity is the difference between the market value of the property and the reduced sales price of the property from the seller, which tends to be the buyer's family members or relatives. To understand more about this topic, check out our FFO calculator.

To understand the calculation of the gift of equity, let's take Cindy as an example:

• Name: Cindy
• Market value of the property: $600,000
• Sales price of the property: $550,000

You can calculate your gift of equity in three steps:

1. Determine your property’s sales price.

   The first step is to determine the sales price of the property. This sales price is typically lower than the market value of the property as it is sold to you by either your family members or relatives.

   In this example, the sales price of the property is $550,000.

2. Calculate the property’s market value.

   Next, you will need to calculate the market value of the property. This is how much the property is worth if it is on sale in the market.

   The property that Cindy is buying has a market value of $600,000.

3. Calculate the gift of equity.

   Now, you can calculate the gift of equity using the formula below:

   gift of equity = market value - sales price

   Hence, the gift of equity for Cindy's purchase is $600,000 - $550,000 = $50,000.