What is a Transfer of Equity and Why would I need it?

A ‘Transfer of Equity’ describes a change in the legal ownership of a property when at least one of the original owners remains. It happens when a person/people are added to, or removed from, the title on land or property, altering the ‘ownership’ of the property from a legal perspective.

Transfers of Equity can happen for many different reasons, the main ones being:

• getting married/cohabiting and wishing to add a new partner’s name to the deeds of the home
• relationship breakdown/divorce and wishing to transfer property from joint names to sole ownership (perhaps if one buys out the share of the other)
• making a gift of a percentage share of a property, perhaps as part of inheritance planning
• tax planning
• when someone has died

It is important to note that the term ‘Transfer of Equity’, refers to the money value in a property, which is the value minus any money borrowed against it (eg. a mortgage).  So for example, if a transfer of equity of 50% refers to 50% of the equity (value-mortgage), and not 50% of the whole property value.

Although transfers of equity can be straightforward, particularly when there is no mortgage involved, they are more complex when there is a mortgage on the property.  In this case the consent of the mortgage lender is required because in adding someone to the title, they will become equally liable for the mortgage.  Equally, in removing someone from the title, they pass their liability on to the remaining owners of the property.

An application will usually need to be made to the current mortgage provider to approve the transfer of equity, before a transfer deed can be drafted or an application made to the Land Registry to register the new ownership of the property.

Fees which may be involved in a transfer of equity:

• Conveyancing Fees
• Mortgage Administration Fees
• Mortgage search fees
• Land Registry Fee
• Stamp Duty Land Tax
• If you are transferring equity in a leasehold property, the freeholder might charge an administration fee.

Further Notes:

Although you can transfer equity to someone under the age of 18,as they are under 18 they cannot legally hold the property, and a trust deed will need to be set up.  The trust deed will name a trustee who will hold the property temporarily until the recipient of the transfer turns 18 and can legally receive the equity.

Although you can carry out a transfer of equity without the assistance of a solicitor, the process can be complicated, particularly in circumstances involving a divorce or separation, and we would urge you to take independent legal advice.

Several complicating factors need to be taken into account including stamp duty and tax considerations.  It is important to ensure that the property is registered correctly at the Land Registry.  Clear understanding of any expectations from the mortgage provider is also important.

If you need help with a transfer of equity or any other conveyancing issues, then call us today on Bingley 01274 723858, Ilkley 01943 601173 or Bradford 01274 735511.