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Conveyancing

transfer of equity illustrated by a man playing chess with houses

What is a transfer of equity?

By | Conveyancing, Property Law

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

concept image of stamp duty land tax

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.

budgeting jar

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.

a model house, key and calculator

Remortgaging explained

By | Conveyancing

If you have a mortgage, there will come a time when you might consider remortgaging. In a nutshell, remortgaging is the process of taking out a new mortgage with a new provider on a property that you already own.

Remortgaging is important as it’s a way of ensuring that you have the best mortgage product available to you. Just as you would shop around once your car insurance policy is coming to an end, remortgaging works in a similar way.

Why should I remortgage?

There are many reasons why you might want to remortgage. Remortgaging can help you to reduce your monthly payments, find a better deal or pay your mortgage off sooner. Usually, people choose to remortgage because their current deal is about to end. If you are due to be put on your lender’s SVR, then you may wish to remortgage to avoid higher/variable rates.

piece of paper titled remortgage

Remortgaging can also allow you to borrow more money against your home in order to release capital. Perhaps you want to carry out some home improvements or buy a new car. When your deal is coming up to expiry, a mortgage broker can research raising additional money against the security of your house. This is handy if you are in need of some extra cash.

If you want to change the length of your mortgage, you can do this by remortgaging. You can remortgage to extend your mortgage over a longer period of time to bring your monthly payments down. This could be over 25/28/30/33/35 & up to 40 years (age permitting).

On the flip side, you may find yourself with some extra money at the end of each month and you wish to reduce your term down from 25 to 22 years, resulting in you paying your mortgage off early.

Lastly, if the value of your home has increased, you might be able to remortgage and be placed in a lower Loan to Value (LTV) band. This makes you eligible for lower rates. Remortgaging does come at a cost though, so make sure the amount you’d be saving is enough to warrant the decision to remortgage.

How much does remortgaging cost?

There are numerous fees involved in remortgaging. You need to be aware of these fees in order to work out whether remortgaging is worth it for you.

Arguably the most important fee to be aware of is the early repayment charge. Whether or not you need to pay this will depend on when you are remortgaging. If you are coming out of your current mortgage deal early during a tie-in period, you will be faced with this charge. It is usually a percentage of the outstanding mortgage debt.

calcualtor and pen against a yellow background

This is the lender’s way of recouping some of the interest they will be losing as a result of you breaking your deal early. For example, on a five-year tracker deal, the early repayment charge could be 5% in year one, 4% in year two, 3% in year three and so on. With this in mind, the early repayment charge can be a significant fee. You would need to find a new deal with a much lower monthly payment than your current one in order for it to make financial sense.

To avoid this fee, make sure your remortgage completes after your current tie-in ends. This is usually when your mortgage incentive period ends.

Other fees to be aware of are:

  • Deeds release fee – around £50-300
  • Arrangement (product) fee – around £1000
  • Booking fee – around £100-200
  • Valuation fee – around £300-400
  • Conveyancing fee – around £300
  • Mortgage broker fee – around £300

Remortgaging vs product transfer

Remortgaging is not to be confused with a product transfer, or a product switch as it is often known as. A product transfer is essentially when you switch to a different mortgage product with your current lender. Unlike remortgaging with a different lender, a product transfer is not normally considered to be new lending, unless you are borrowing an additional amount.

A product transfer is generally a quicker (4-6 weeks) and simpler process. This is because your current lender ought to have your details to hand from your original application. You also don’t need to supply wage slips or any documentation. It is just a simple swap of mortgage products. You generally have less fees to pay as well, as you are able to avoid legal costs and valuation fees.

woman meeting with her solicitor about remortgaging

The downside is that you might not get the best deal available by limiting yourself to solely your current lender. Plus, your current lender may do all they can to encourage you to stick with them so as to not lose your business. This can leave you confused. It’s a good idea to shop around for peace of mind that you are making the best decision.

By remortgaging with a new lender, you will have access to more deals. You may even receive incentives such as cashback, a free valuation or free legal fees in order to attract you as a new customer. You will be hit with more fees, however, and you will have to submit a new application and start the remortgaging process from scratch. The best decision for you will depend on your individual circumstances.

 

If you need support during the remortgage process, we at Bromfield Legal are here to advise. Once you have an offer, one of our expert solicitors can provide the remortgage conveyancing on your behalf.

Simply get in touch with us today and arrange to speak to someone at your nearest Bromfield Legal office.