Life circumstances are always changing, and with that can come the need to transfer property ownership. This can appear overwhelming, but it doesn’t have to be. With the right knowledge and an expert conveyancer, you should have no problems completing a transfer of equity.
In the following guide we will explain what a transfer of equity is, how the process works and how much all of it will cost.
What is Equity?
When used in the context of property law, equity is the value of your property minus any mortgage or loan you are yet to pay off. In simple terms, it is the amount of money that you currently have invested in the property.
What is a Transfer of Equity?
A transfer of equity describes the addition or removal of someone from the title deeds of a property. It can also refer to a legal change in percentage of ownership.
It is important to clarify that this is not a sale as at least one of the owners of the property remains the same.
There are plenty of reasons someone might want to arrange a transfer of equity.
These can include:
- Adding a partner or family member
- Removing an ex-partner or family member
- Selling your share of the property
- Buying out a joint owner
Please note that when adding an owner, you only need one conveyancer to represent both of you, whereas if you are removing an owner, the same law firm cannot act for both parties.
The Transfer of Equity Process
The Transfer of Equity process can look different depending on whether you have a mortgage or own your house outright.
With a Mortgage
If you currently have a mortgage and intend to keep your mortgage after the transfer, you will need the consent of your mortgage lender. If you are planning on paying off your mortgage before the transfer, this is not necessary.
To get the mortgage lender’s consent when adding an owner, you will need to prove to the lender that the new owner can afford to pay their percentage of the mortgage.
New conditions might need to be agreed upon with the lender regarding the changed ownership structure.
To get the mortgage lender’s consent when removing an owner, you will need to prove to the lender that you can afford to pay the mortgage without the previous co-owner.
Once you have approval from your mortgage lender, your conveyancer arranges the transfer deed. You sign in the presence of a witness and your conveyancer registers the deed at the Land Registry.
Any parties being removed from ownership will need to complete and sign an ID1 form, in the presence of a solicitor.
If your mortgage lender does not give their consent, you will have to pay off the mortgage before transferring equity.
Without a Mortgage
If you own your home outright, you will not need the consent of a mortgage lender. This makes the process much simpler.
The transfer deed is arranged by your conveyancer and signed by the current and any new property owners in the presence of a witness.
Your conveyancer will then register the deed at the Land Registry.
Will I have to pay Stamp Duty Tax?
If you are getting divorced and splitting a co-owned property, you will not usually have to pay Stamp Duty Tax, provided you are both on the Title Deeds and mortgage.
If you are transferring equity for any other reason, you may have to pay Stamp Duty Tax.
Your property will fit into a price band depending on the value of the transaction and this is the amount of Stamp Duty Tax you will be required to pay.
For a reminder on what Stamp Duty Tax is, you can read our explainer article here.
How Long Does a Transfer of Equity Take?
On average, it takes around four to eight weeks for a Transfer of Equity to be completed and this will vary case to case depending on a number of factors. Leasehold transactions can take longer due to landlord requirements which they will charge for.
One reason for delay could be if you are transferring ownership due to a divorce. In this instance, the process may be halted if the case has yet to be settled in court and assets have not yet been divided.
Another typical hurdle that causes delay is having a mortgage. Getting approval from your lender can take a fair amount of time.
All mortgage lenders have different processes when deciding whether to give consent for a transfer and some checks will take longer than others.
How Much Does a Transfer of Equity Cost?
The costs associated with a Transfer of Equity are varied and are dependent on several things.
Firstly, you will pay your conveyancer a fee based on the value of your property and whether you are remortgaging or not. These fees are usually between £100 and £500 + VAT and small charges may be added for administrative tasks such as online ID checks.
There will also be a fee to register the change of ownership with the land registry. This will change depending on the value of your property and can range from £20 to £350.
Mortgage lenders may also charge for any administrative costs at their end. This can cost between £60 and £300 depending on the value of the property.
How PM Property Lawyers Can Help
When you are looking to complete a Transfer of Equity, it is crucial to understand all the steps involved.
Our experienced conveyancing team can help:
- Provide legal advice and guidance about the consequences of your transfer
- Prepare all the necessary documentation
- Liaise with your mortgage lender and any other involved parties
- Advise on any Stamp Duty Tax implications.
For clear and simple legal advice, get in touch with PM Property Lawyers today.
