Transfer of Equity and your Home
10 April 2019 by Marion Knocker
What is A Transfer of Equity?
A transfer of equity occurs when the legal owner of the property wishes to add or remove a party to, or from, the legal title of the property. If the property is owned in the sole name of a party and they marry, the property is then often transferred into joint names by way of a transfer of equity. If the property is owned jointly and they separate, the property may be transferred into the sole name of one of the owners; again, by way of a Transfer of Equity.
Briefly the process of a transfer of equity is as follows:
- Firstly, what happens if the property to be transferred is subject to a mortgage? The first step is to make an application to the mortgage lender; this is to either remove a party from the mortgage, or to add a new party to the mortgage.
- If removing a party from the legal title, the mortgage company must consent to remove the party from the mortgage; as well as their obligations in connection with the same.
- The acting conveyancer will prepare the necessary transfer deed taking into account any requirements of the mortgage company (if any) and any consideration (money) that may be being paid for the transaction.
- Some transfers of property are made by way of gift in that no money changes hands. If a party is being removed following a separation, there is likely to be consideration paid for the outgoing parties share in the property.
- The transfer will be sent to the parties/conveyancer for approval and once all agreed all parties will sign the deed and return to the acting conveyancer to arrange completion.
- Consideration as to any Stamp Duty Land Tax payable also needs to be applied. Stamp duty is calculated as follows:-
- Half existing mortgage + consideration to other party = if the total is above the SDLT threshold, then stamp duty applies.
The process of the transfer generally takes about two to three weeks. However, this is dependant on how quick instructions are issued by the lender; as well as the response of the outgoing parties conveyancer.
Beware that there are a few issues that can arise from a transfer of equity. It is important to seek legal advice to help combat these.
- Agreement on the consideration being applied to the transaction.
- If the transfer is a gift, possible indemnity insurance for transaction at undervalue.
- Calculation of any Stamp Duty Land Tax that applies to the transfer.
Moreover, a Solicitor can help home-owners looking to change the co-ownership of their property. This is done by preparing the necessary documentation to transfer the ownership of the legal title; as well as guiding home-owners through the process to completion and subsequent registration at the Land Registry.