Transfer of Equity

What is a Transfer of Equity?

Transfer of Equity is the legal process of adding or removing someone from the title deeds of a property (adding or removing them as an owner). Equity refers to the percentage someone owns in a property, but it is important to note that this is the property value less the outstanding mortgage. If a lender holds a charge over the property, then the lender must be informed of the transfer because their consent will be required.

Why would I want a Transfer of Equity?

You may wish to transfer equity for various reasons, such as tax purposes, buying the equity of a joint owner, a new relationship or the breakdown of an existing relationship.

What happens during a Transfer of Equity?

First, all parties involved in the process must arrange for independent legal advice, especially in cases where the parties are separating.

Once a solicitor has been instructed, they will go through the next stages:

• Investigate the title deeds, which will be acquired through the Land Registry website.
• Based on the information within the title deeds, the solicitor will then draft the transfer deed documents.
• Once drafted, the solicitor will arrange for an appointment with the client to sign and witness the documents.
• Consent must be sought from any lenders, banks or building societies holding a mortgage or security over the property.
• Finally, registration can then take place by submitting the transfer deed and related documents to the Land Registry. A Land Registry fee is payable depending on the value of the property.

Considerations when adding someone to the ownership

When transferring the property into joint names, for instance after marriage, you could be charged stamp duty (SDLT). This happens when the house is subject to a mortgage. Even if no money changes hands, the new owner is taking on an equal share of the mortgage debt.  This value will be subject to SDLT on a sliding scale. Gov.uk use this example to illustrate:

• The owner of a property valued at £500,000 has an outstanding mortgage of £400,000. When they marry, they decide to transfer half the property to their new partner.
• This means their partner takes on half of the mortgage (£200,000). This is referred to as ‘chargeable consideration’.
• By taking liability for the mortgage, they must pay SDLT on that amount. It’s charged at £1,500 in this example (0% of £125,000 + 2% of £75,000).

Note that if the chargeable consideration is less than £125,000 there would be no stamp duty owed (all at 0%).

Also, when adding a person on the title deeds, it is very important to consider having a Deed of Trust put in place as this will set out the ownership of the property, especially if holding in unequal shares.

Considerations when removing someone from the ownership

If someone is being taken off the title deeds and there is a mortgage secured on the property, the person being taken off the title deeds must in some way settle their share of the debt. They cannot be released without fulfilling their part of the mortgage agreement with the lender. This can be achieved by:

• paying off the mortgage,
• getting approval from the lender to transfer the property as part of a buyout, for example if the co-owner purchases the other share of the property,
• re-mortgaging, which is most likely where the partners are separating.

If you would like further information or advice about transferring the equity in your property, please contact Anthony, Karen, Michelle, Jodie or Sandeep on 01752 668246 or send an email by clicking here. Alternatively you can obtain an online conveyancing quote by clicking ‘online quote’ in the menu.