Do you want to give your partner or children a stake in your property? How about moving in together with a roommate and you want to share the property together?
If you want to change who has legal ownership of your home without selling your property on the market, you’ll need to go through the transfer of equity process.
However, if you’re not familiar with how the process works, we’ve got you covered with the key things that you need to consider to complete the paperwork in no time and navigate the transfer of equity smoothly.
What is equity?
In simple terms, equity refers to how much of a property you own.
If you have a mortgage, you can calculate your equity as the difference between the current value of your home and the outstanding amount you owe to pay off your mortgage in full. For instance, if your houses values £250,000 and the amount you still need to pay to complete your mortgage is £150,000, then your transfer is equity is £100,000.
What is a transfer of equity?
A transfer of equity is the process where you change the ownership status of your house, whether you’re adding or removing someone from the title deeds of the property.
For example, a transfer of equity might come in handy when you want to move in together with your partner and co-own the property. On the other hand, in the event of a divorce or separation, you can divide the assets and remove one party as an owner, thus you are becoming the sole owner of the house.
In addition, you can transfer equity to your children or other family members to become more tax efficient.
When would you need a transfer of equity?
- Changing the ownership of a property: When someone buys or sells a share in a property, a transfer of equity is required to reflect the change in ownership.
- Adding or removing a person from the ownership of a property: If a person wants to add or remove a co-owner from a property, a transfer of equity is required to reflect the change in ownership.
- Changing marital status: If someone gets married or divorced, a transfer of equity may be necessary to reflect the change in the ownership of a property.
- Inheritance: When a property is passed down from one generation to the next, a transfer of equity may be necessary to reflect the change in ownership.
- Gift: When a property is gifted from one person to another, a transfer of equity may be necessary to reflect the change in ownership.
Do you need a solicitor for a transfer of equity?
Depending on your situation, both you and your partner might need a solicitor to help you navigate the transfer of equity and achieve the desired outcome.
If one party is buying out from the other one, the one who transfers his equity will need independent legal representation to make sure the process runs smoothly and ultimately, both partners are satisfied. However, we recommend both parties use a reliable conveyancing solicitor, no matter the circumstances, to ensure the transferor will get the same monetary value for his equity, while the transferee will be assured that he’s the only one who has a claim on the property moving forward.
How does the process work?
The transfer of equity is generally a straightforward process, however, hiring a conveyancer to handle it on your behalf will give you peace of mind that your interests are protected at all times.
Your solicitor will help guide you through this process, however, we’ve outlined the main steps and what you can expect:
- Take a copy of the deeds – The first step is for your solicitor to review the title of your property, as well as check the identities and eligibility of both parties involved.
- Prepare the documents – Once your copy is reviewed, the solicitor will prepare the deed documents so they can be signed by both parties.
- Let any third parties know – The solicitor has a legal responsibility to notify all third parties involved, such as the mortgage lender or the bank so they can approve the transfer of equity.
- Sign the deed – Once the documents are ready to be signed and you got the consent of the lender, the next step is to meet with your solicitor and sign the paperwork. It’s also necessary to have an independent witness when the transfer takes place.
- Notify the Land Registry – Depending on the size and value of your property, you will have to pay a fee to the HM Land Registry and let them know about the details of the deed transfer.
How long does a transfer of equity take?
The length of time it takes to complete a transfer of equity varies and can depend on several factors such as the complexity of the situation, the number of parties involved, and the speed at which the relevant paperwork is processed. On average, a transfer of equity can take anywhere from several weeks to several months to complete. It’s important to work with a professional conveyancer to ensure the process goes as smoothly and efficiently as possible.
However, there are exceptional circumstances that can lengthen the process, such as a dispute or a divorce that hasn’t been finalised yet in Court.
What are the costs of a transfer of equity?
The cost of transferring equity will depend on a variety of factors, such as whether or not you use a solicitor and the value of your property.
To give you an idea, you should consider the conveyancing fees which usually range between £250 to £500. As mentioned above, the solicitor’s job involves identity checks for both the transferee and the transferor, which can be around £9 per person.
Finally, you should consider the HM Land Registry fees, based on the value of your equity and your current mortgage plan.
The HM Land Registry is a non-ministerial department whose role is to register the ownership of land and property across England and Wales.
What are the tax implications of an equity transfer?
The tax implications of the equity transfer are based on the nature of the transfer. At the moment, there is no capital gains tax (CGT) being charged on transfers to a spouse or partner.
For more information on tax planning, we recommend speaking with a professional solicitor that can advise you from the start about the tax implications.
Can you transfer the equity of a mortgaged property?
If a mortgage is involved, then the person leaving the property will need to be released from the terms of such an agreement.
To resolve that, you can either pay off the mortgage in full or even remortgage the house in order to discharge the current mortgage and use the surplus to do a buyout.
At Gorvins Residential, we specialise in all aspects of the transfer of equity process. Regardless of your needs and budget, we can help you reach the desired outcomes and navigate the transfer of equity process smoothly and hassle-free.
Get in touch with our friendly team today for more details or if you have any questions.
