Category

Property Law

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.

when should i look to remortgage

When should I look to remortgage?

By | Property Law | No Comments

Remortgaging is a little bit like renewing your car insurance. It’s important to shop around and make sure that you have the best mortgage product available to you. And whilst it is possible to remortgage up to six months before your fixed term ends, you need to decide whether it makes financial sense.

Most people will choose to remortgage as their current deal comes to an end. Remortgaging before your current deal ends can be expensive, as you may spend more on early exit fees than you’d save on the better deal. It’s not worth remortgaging if you’d spend more on fees than you’d save.

What is remortgaging?

Remortgaging is the process of taking out a new mortgage to replace your current one on a property that already belongs to you. No one is tied into the same mortgage forever – it’s something that can be reviewed regularly to make sure that you’ve got the best deal for your situation and this is exactly what the remortgaging process allows you to do.

when should i look to remortgage

You can either remortgage by switching to a new deal with a new lender, or by switching to a different deal with your current lender. There are pros and cons to both, depending on your individual circumstances and the deals on offer to you at the time of remortgaging.

Should I remortgage early?

Whether you should remortgage early depends on your individual circumstances, and whether the fees you’ll need to pay in order to get out of your current deal outweigh the money you’ll save on the new deal. Whilst mortgage lenders want to entice you in with attractive rates, they also want to lock you in so getting out of your deal early can be difficult. Be sure to double-check the terms and conditions of paying off and exiting your mortgage early.

when should i look to remortgage

You may want to avoid remortgaging before your current deal ends and steer clear of any costly fees. Instead, you could start looking for a remortgage deal around three months before your current one ends, giving you enough time to shop around, get advice and complete the application process in time to synchronise your current deal ending and your new deal starting.

How long does remortgaging take?

The process of remortgaging doesn’t take all that long. Remortgaging to a new lender can take up to two months. If you are switching over from the same mortgage provider to another one of their products, then it could take just a month. If you are involving a third party (such as Help to Buy or Housing Association) then the process can take longer, as it is a slightly more complicated process.

when should i look to remortgage

Generally, the basic remortgaging process is as follows, but can vary from lender to lender:

  • Your current lender writes to you to let you know that your current deal is coming to an end. If you are on an introductory deal such as a two or five-year fixed rate, they will let you know that you are due to revert to the Standard Variable Rate (SVR)
  • Ask your lender for a closing balance, which is the amount needed to pay off the remaining mortgage loan. This is the amount you’d need to borrow if you choose to remortgage
  • You may want to find a mortgage broker to search the whole of the market and find you the best deal for your circumstances
  • If you decide to change mortgage lenders, you’ll need to appoint a solicitor such as us here at Bromfield Legal. We will sort out any paperwork needed, carry out all necessary searches, and deal with the drawing up and signing the mortgage deed. The process will usually take longer if you change lenders
  • The eligibility and affordability checks will be carried out. You will need to provide documents such as three months’ bank statements and/or payslips, utility bills, address details, photographic ID, your P60 etc. Your mortgage broker will be able to advise you on exactly what to have ready
  • Your lender issues your Mortgage in Principle
  • Your lender will arrange a valuation, to confirm that the house is worth enough to secure the amount that you are asking to borrow
  • If the lender approves your mortgage application, you will be sent your offer letter
  • Your solicitor requests the money from the new lender and uses it to pay off the old mortgage
  • Your solicitor registers the mortgage holder’s detail with the Land Registry.

Why should I remortgage?

There are many reasons why you might want to remortgage. Most commonly, people remortgage because their current deal is about to end. If the fixed-rate term of your mortgage is ending and you are due to be put on your lender’s SVR, then you might want to remortgage to avoid higher/variable rates.

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

when should i look to remortgage

You may also decide to remortgage if you want to change the length of your mortgage. Perhaps the monthly payments are proving too expensive. You can remortgage to extend your mortgage over a longer period of time. This could be over 25/28/30/33/35 & up to 40 years (age permitting). The opposite may also be true, where you are finding yourself with some extra money at the end of each month. You may decide to reduce your term down from 25 to 22 years, for example, resulting in you paying your mortgage off early.

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, thus making you eligible for lower rates. Remember though, unless you’d make a pretty big saving, the cost of remortgaging could negate the savings you’d make so make sure you weigh up all the costs before making any decisions.

At Bromfield Legal, we understand that remortgaging can be a way to reduce your interest rates and payment installments on your mortgage, or on other debts. When there’s so much at stake, it’s a wise idea to bring in a legal expert to ensure that the process is dealt with properly.

Our expert mortgage advisor team are here to support you through the remortgage process. Just contact us today and arrange to speak to someone at your nearest Bromfield Legal office.