Gift of Equity Calculator
Compute the gift of equity when a property is sold below market value to a relative: market value − sale price, and its percentage of market value.
Input Data
Results
At a glance:A gift of equity is the gap between a property's market value and a below-market sale price to a family member — that gap is equity given to the buyer. Gift of equity = market value − sale price; gift % = gift ÷ market value × 100%. Common when parents sell to children; the buyer can treat it as part of the down payment, cutting cash or loan needed and helping meet the LTV. In Hong Kong, AVD stamp duty is usually charged on the higher market value, so a low sale price does not cut duty. Consult tax/legal professionals for actual arrangements.
Formula
Gift of equity = market value − sale price.
Gift % = gift of equity ÷ market value × 100%.
How to Use
- Enter the property's open-market value.
- Enter the actual sale price to the relative.
- View the gift of equity and its % of market value.
At market value HK$6,000,000, gift by sale price
| Market value | Sale price | Gift of equity | Gift % |
|---|---|---|---|
| 6,000,000 | 5,500,000 | 500,000 | 8.33% |
| 6,000,000 | 5,000,000 | 1,000,000 | 16.67% |
| 6,000,000 | 4,800,000 | 1,200,000 | 20.00% |
| 6,000,000 | 6,000,000 | 0 | 0.00% |
Lower sale price → larger gift and %; equal price → zero gift. HK AVD is usually on the higher market value, so a low price does not save stamp duty.
Case Studies
Case 1: Parents sell below market to help a child buy
Parents' unit market value HK$8,000,000, sold to child at HK$7,000,000. Gift = 8,000,000 − 7,000,000 = HK$1,000,000, ~12.50% of value.
If the bank lends 70% on value, the child needs ~HK$2,400,000 down; the HK$1,000,000 gift counts as existing equity, covering part of it and cutting cash needed. Whether the bank treats it so must be confirmed first.
Case 2: Gift size vs stamp duty trade-off
Family sells a HK$5,000,000 market-value home at HK$4,500,000 → gift HK$500,000, 10.00%.
Though the sale price is only 4.5M, HK AVD is usually charged on the 5M market value, not reduced by the discount. So plan related-party transfers considering gift size, stamp duty and bank valuation; consult professionals for tax and legal set-up.
FAQ
What is a gift of equity used for?
When a relative sells below market, the buyer effectively receives the value gap for free; that 'gift' can count as part of the down payment or equity, helping meet the lender's LTV and reducing cash needed. But recognition and tax treatment vary by jurisdiction — check with the bank and professionals first.
Can the gift of equity be negative?
In theory yes — if the sale price exceeds market value the gift is negative, meaning buying above market, which rarely happens in practice. Normally the sale price is at or below market, so the gift is positive or zero.
Is stamp duty payable on a related-party sale?
Yes. Hong Kong charges AVD on property transfers (including between relatives), usually based on the higher market value (not the lower sale price), to prevent avoidance via a low price. This tool only computes the gift amount; actual stamp duty, valuation and legal arrangements need a tax or legal professional.
Will the bank count the gift as down payment?
Not automatically — it depends on the bank's policy. Banks usually lend at the lower of sale price and valuation; if the sale price is well below market, the bank may value only on the sale price and not treat the gap as extra down payment. Always ask the bank how it handles related-party sales and gifts of equity before proceeding.
Other legal or tax risks in a below-market sale?
Possibly. Beyond AVD on market value, if the seller recently acquired at a lower price or there are bankruptcy/debt-recovery concerns, a low-price transfer may be seen as a suspect transaction. Also consider family equity split and the holding period for later resale (affecting Special Stamp Duty, SSD). For large related-party transfers, consult a lawyer and tax adviser.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.