What Is A Transfer Of Equity?
A Transfer of Equity is a change in the co-ownership status of a property. You might arrange a transfer of equity to:
- Add your spouse to your property's deed if you have married or remarried
- Remove your ex-partner from the deed if you have divorced
- Change the percentage shares owned by the co-owners of a jointly owned property or buy out a co-owner's share in the property
- Reduce future inheritance tax liabilities or take advantage of personal capital gains limits
What Is Equity?
Equity is the value of your property less the outstanding sum of your mortgage. For example, if you own a home costing £200,000 and you have a remaining mortgage of £80,000, you have £120,000 equity.
If you got married and want to co-own the property with your new spouse, you can only transfer half of the equity – worth £60,000 in this case – rather than half of the value of the overall property.
The Basic Process
To start a Transfer of Equity you will first need an official copy of the title for the property. This will be used to check if there are mortgages on the property or any other restrictions that might be involved.
Your conveyancer will then:
- Review the title deeds or property deeds
- Check the identity of the clients
- Prepare the transfer deed
The next steps depend on whether or not there are any mortgages on the property.
If there are no mortgages on the property, the existing and new owners of the property sign the transfer deed in the presence of a witness and the conveyancer registers the transfer deed at the Land Registry. A stamp duty certificate is needed if the value of the transaction is above £40,000.
If there is a mortgage on the property, you will also need the consent of the mortgage lender to go ahead with the transfer.
This is because if you are adding someone to the title, they will become equally liable for the mortgage.
Equally, if you are removing someone from the title, they will pass their liability on to the remaining owners of the property. The mortgage lender will want to check that remaining owners are able to maintain mortgage payments before agreeing to the transfer.
Your conveyancer will contact the mortgage lender and request written consent to the transfer. The mortgage lender may want to change the terms of the mortgage before consenting. Once written consent is received, the process can continue as above.
If the mortgage lender does not agree to the transfer, you will need to repay the mortgage before you can go ahead with the transfer. This can either be with a cash payment or a remortgage with a different lender who agrees to the transfer.
If you have any questions about the Transfer of Equity Process, please call us on 0370 1500 100 to speak to a member of our Conveyancing team and find out how we can help.
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All Scottish cases will be handled by the Scottish law firm with which we are associated, Irwin Mitchell Scotland LLP. The law relating to conveyancing and property is different in Scotland and you will receive separate advice about what that means. Please visit our Scottish Conveyancing page for more information.
