Transfer of equity is the process of you adding or removing someone from the deeds of a property. It is also sometimes referred to as property transfer. There is no sale of the property and at least one of the original owners will stay the same. There are a number of reasons why you may want to do a transfer of equity.
Arguably the most common reason is that you are separating from your partner and dividing up assets. Or perhaps you bought a property yourself but are now in a relationship and would like to add your new partner to the deeds. Maybe you are buying out the equity of a joint owner, or even transferring equity to your children or another family member to provide a financial gift in a more tax-efficient way.
Whatever the reason, you will need to go through the transfer of equity process. There are a few moving parts, but we are going to break it all down for you in this article.
How does transfer of equity work?
When all parties agree on the outcome and the terms and conditions are clear for everyone involved, a transfer of equity can be pretty straightforward. There can be elements that complicate the process, however, such as disagreements and mortgages.
In simple terms, the process of a transfer of equity is as follows:
Step 1 – To start the transfer process, your solicitor will obtain an official copy of the title deed for the property. Your solicitor will review this to check for a mortgage or any other restrictions on the property. As the property’s ownership is changing, you may need to apply for a remortgage or a new mortgage deal if applicable. Speak to your provider or a financial advisor about your options and try and agree a mortgage in principle if possible.
Step 2 – If someone is being added onto the property deeds, you will need to instruct a conveyancer or a solicitor who specialises in conveyancing. In this instance, both parties can be represented together. If someone is being removed from the property deeds, the parties will each need to have separate legal representation.
Step 3 – Your solicitor will take care of the legal work and prepare the transfer documents, confirming things with your mortgage provider (if applicable), as well as the property’s freeholder (if applicable). All third parties will need to be notified and will also need to provide their written consent. Your solicitor will then send the mortgage deed for you to sign.
Step 4 – The process is complete and your solicitor will facilitate the transfer of any funds between parties. Outgoing parties will need to complete and sign an ID1 form in the presence of their solicitor.
Step 5 – Lastly, your conveyancer will calculate any stamp duty liable to HMRC and facilitate the payment of this. They will also ensure that details of the new property ownership are logged with the land registry. This will involve a fee, which can range from around £50 to nearly £1000. It depends on the value of the property.
Of course, it is not always that straightforward. It depends on different factors, such as if mortgage lenders are involved. In some cases, there can be more than two parties involved, for instance, if someone is remaining on the title deeds, someone is being removed from the title deeds and a third party is being added onto the title deeds.
In the instance that someone is leaving the property, the remaining party will need to ‘buy’ the other party out. This will usually involve remortgaging with the existing lender or transferring the mortgage to a new provider altogether.
How long does a transfer of equity take?
Generally speaking, a simple transfer of equity can take around 4-6 weeks to complete. Every transaction is different, however, and it depends on the situation and how complicated it is. If there is a mortgage on the property, the transfer will take longer as you will have to wait to receive written consent from any lenders involved.
If one party does not give consent to the transfer of equity or if the transfer is required as part of a larger legal dispute – for example, a divorce that is being resolved by the Court – this will also throw up delays in the process.
Do you pay stamp duty on transfer of equity?
Whether stamp duty land tax needs to be paid will depend on the ‘consideration’ and the nature of the transfer. ‘Consideration’ refers to the amount of the property that you will take over from the previous owner. Whether you pay stamp duty will be dependent on the size of the consideration. This includes both the equity (value of the property) and the value of the mortgage.
Not all situations where you might need a transfer of equity will result in needing to pay stamp duty. Here is a breakdown of when you might need to pay stamp duty:
- If you are not married or you are in a civil partnership and transferring to one person, you may have to pay stamp duty
- If you are gifted a property with a mortgage, you will have to pay stamp duty on the portion of the mortgage that you now own, even if the payments do not transfer to you
- If you are buying a portion of the equity and the mortgage, you will need to pay stamp duty
You might not need to pay stamp duty if:
- You do not have a mortgage
- If you are divorcing
- If you have inherited a property in a will, even if it has a mortgage
Transfer of equity costs
Alongside possible stamp duty land tax (which is usually the largest cost), you may come across other costs associated with a transfer of equity. Additional costs do depend on whether you are adding, removing or replacing someone on the deeds, and whether the property is leasehold or freehold. The amount of these costs will differ hugely between individual circumstances.
Here are some of the other costs you may need to budget for:
- Conveyancing/solicitors fees – this will depend on your conveyancer/solicitor, the property value and whether you need to remortgage the property
- Legal fees – these fees depend on the solicitor. Some may include it in their general charges and others won’t. These fees often include ID verification, a copy of the property’s register of title and ownership change registration
- Mortgage fees – some banks will charge you their fees. These include service fees that cater to administrative costs involved in the process.
Can I do a transfer of equity myself?
Whilst yes, you can do a transfer of equity yourself, it is highly recommended that you turn to a solicitor to do it for you. In the simplest of cases, it is just a case of arranging the document that both you and the person you are transferring to or from the deeds have to sign. This will then need to be sent to the land registry.
If the situations surrounding the transfer of equity are more complex, then it is best to speak to enlist the help of a solicitor to help you. Make Bromfield Legal your first choice for transfer of equity services. Our transfer of equity solicitors can help you get a house deed legally changed, whilst avoiding any potential mistakes.
You can trust our qualified and experienced team of solicitors. Contact us today to find out more.