Definition
The distinction between gift and family loan is critical for mortgage qualification:
**Gift**: - No repayment required or expected - Must come from a close relative (parent, grandparent, sibling depending on lender) - Gift letter signed by donor and borrower, confirming the gratuitous nature - Proof of funds in donor's account + transfer to borrower's account - Creates no debt in TDS calculation
**Family loan**: - Even at 0% interest, if repayment is planned (loan contract), the lender treats it as a monthly debt - The imputed monthly debt (principal ÷ 120 months or 240 months depending on lender) is added to other debts in TDS - If the loan contract states 'no repayment for 10 years' but still provides for eventual repayment, some lenders still treat it as debt
Conclusion: to maximize borrowing capacity, a gift is always preferable to a loan. If it's a loan, repay it before the mortgage application.