Transfer of equity guide

Contents

What is a transfer of equity?

Transfer of equity is when a person is added or removed from the title deeds of a property. This means that a person is either no longer the owner of the property or becomes a part owner of the property. At least one of the original owners must remain on the title deeds. Considerations such as, if there is a mortgage or if there is equity within the property are considered.

Below we have detailed the full transfer of equity process step by step, For more information we have provided detailed explainer videos for each step.  

Conveyancing Process for a Transfer of Equity Explainer Videos:

Why do people transfer equity?

There are several reasons why people will require a transfer of equity, most commonly due to a change in personal circumstances. For example:

  • Adding a new partner to the deeds of the house
  • Due to divorce or separation, where one partner will remain in the property and ownership is transferred to that person
  • Buying out or adding joint owner/s
  • As a gift, where a parent, for example, adds a child to their property deeds or gifts their property

What are the types of property transfer when transferring equity?

There are two types of property transfers, and it is important to be clear which it is you are undertaking as it will impact the administration of the transfer.

Full transfer of ownership

A full transfer of ownership is when you transfer the full ownership of the property to another person or are removing a person completely. An example is if you are gifting the property to another person such as a family member or if you are divorcing and need to remove a partner from the ownership of the property.

Part transfer of ownership

Part transfer is where you add another person to the deeds or remove part of their share on the deeds. For example, you may be the sole owner of a property and wish to add a new partner to the deeds of the property so you both become joint owners. The number of shares that can be transferred can vary.

Do I need a conveyancer for a transfer of equity?

A conveyancer is an important requirement when transferring equity, as they will be responsible for ensuring that all the legal requirements are met for your circumstances. The personal situation of those involved and the reasons for undertaking a transfer of equity can make the legal process quite involved, so instructing an experienced conveyancer is important to ensure a smooth transaction and that you receive the right legal advice.

How does transfer of equity work?

The transfer of equity process typically involves the preparation and execution of a legal document known as a “deed of transfer” which outlines the terms of the transfer, and the payment of any stamp duty and legal fees. The process is usually handled by solicitors, who will ensure that all necessary steps are taken to legally effect the transfer of ownership.

What is the process for a transfer of equity?

There are many variables to consider when transferring equity such as, if there is any outstanding mortgage, if you are gifting the property to a spouse, a child or civil partner, if you are buying out one or more joint owners, if there is a refusal on the part of one the parties to move forward with the transfer.

Below is an overview of the key steps involved:

Step 1: Consider the mortgage situation and seek financial advice

The mortgage situation of those involved can affect the steps required and so this needs to be understood and financial advice sought. For example, if a person is being added to the property's ownership and there is a mortgage on the property, then the mortgage lender will need to carry out their own checks to ensure the person(s) is/are suitable. It may also be the case that a new mortgage is required as changing a property's ownership will affect the equity and the terms of the current mortgage.

Step 2: Instruct a conveyancer

It is necessary to instruct a conveyancer to take care of the legal aspect of the transfer. Where a person is being added to the deeds then both parties can use the same conveyancer. However, if someone is being removed, then both parties will need to have their own legal representation.

Step 3: Conveyancer obtains the title deeds

The conveyancing solicitor will obtain an official copy of the title deeds for the property. They will also do background checks for a mortgage and any other restrictions on the property. They will also check the identities of each party. If the person being removed from the title deeds is to be paid, the conveyancer will also have to confirm the source of funds to be used.

Step 4: Conveyancer prepares the transfer documents

The conveyancing solicitor will compile the transfer deed document and prepare this ready to be signed. The form is filled out by the person staying in the property. It is sent on to the person whose name will be removed.

Step 5: Notifying of third parties

For the transfer to be completed, any third party involved in the property, such as a mortgage lender, bank or building society, will need to provide their written consent. If the property is being transferred subject to the current mortgage, the lender will need to be a party to the transfer deed.

Step 6: Signing of the deed

Once the conveyancer has prepared the mortgage deed to sign, they will then co-ordinate the transfer of any funds between parties. Outgoing parties will need to complete and sign the relevant form, in the presence of their conveyancer.

Step 7: Notifying the Land Registry

The details of the deed transfer will be submitted to the Land Registry, for which a fee is charged. The fee varies depending on the value of the property.

Step 8: Settlement of stamp duty

The conveyancer will calculate any stamp duty liable to HMRC and facilitate payment of it.

How much does transfer of equity cost?

The two main costs associated with any transfer of equity are the legal fees of the solicitor and the Land Registry fee you must pay when notifying the Land Registry of the new deed. A Conveyancing Solicitor will likely charge between  £100 and  £500 + VAT. There will also be other charges including online ID checks, and the official copy of the Register of Title from the Land Registry.

The cost of a transfer of equity will vary on the circumstances and the value of the property. It will also vary depending on whether you are adding, removing or replacing someone on the deeds. if the property is leasehold or freehold and the situation of any mortgages on the property

What information will a transfer of equity quote provide?

A transfer of equity quote will give you a clear breakdown of the legal, disbursement and third-party costs you can expect to pay for your transfer of equity situation. It is important to speak to a conveyancer and discuss the quotation with them so any changes can be made that may affect the cost.

Does having a mortgage affect the cost of transferring equity?

If there is a mortgage on the property, there may be charges payable to your lender, sometimes known as a 'change of parties' fee. This covers the lender's administrative costs of adding or removing someone from a mortgage.  
  

Before the transfer goes ahead, a current or new lender may also require a local authority search to confirm the condition of the house. Alternatively, they may require you take out a Local Authority search indemnity insurance which will protect them if the condition of the property has changed. There will be costs associated with this.

How much does stamp duty cost when transferring equity?

During a transfer of equity, you will be taking on a certain percentage of the equity in a house and you may also be taking on part of any mortgage. Stamp duty may be applicable depending on what price band the transaction falls in.

How long does a transfer of equity take?

The transfer of equity process usually takes 3-6 weeks to complete, but timescales will vary, depending on a person's circumstances. For example:

  • If there is no mortgage lender involved, the process is more straightforward and so the timescale will be shorter
  • If there is an existing mortgage in place, the process will typically take longer as you will need to wait until you have written consent from your lender. The lender will also need to investigate the eligibility of the new owner/s.
  • If you are remortgaging, consent from your existing lender is not required. However, the remortgage will need to be applied for during the transaction which can take time.
  • If the property is leasehold, your conveyancing solicitor will need to obtain the appropriate consents from your landlord or freeholder.

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