Transfer of Equity: The BasicsZoe Norgrove
Equity is the legal term for the amount of money you have in your property, being the value of the property less the balance of any mortgages. Transfer of Equity is therefore a change in the ownership of a property. This could be by adding another person, removing a person or transferring the property into the name(s) of new individuals. This will be done through altering the title deeds.
Despite what the name suggests, transfer of equity can be achieved without money changing hands. This is more common when parents wish to transfer the property into the names of their adult children for example, often for tax planning purposes.
It is common for people to transfer equity when they are going through changes in their family circumstances, including when a couple move in together, marry or form a civil partnership, or where a couple divorce/separate. Within divorce proceedings, a transfer of equity can be ordered by the court, or it can be by agreement between parties as part of a divorce settlement or separation agreement.
A transfer of equity is usually a straightforward transaction, providing there is no current mortgage on the property in question. The process will usually be quick (depending on individual situations) and will mainly involve submitting paperwork filled out by all parties to be submitted to the HM Land Registry.
Although it is still possible to transfer equity with a mortgage on the property, this does add some further stages to the transaction. Your mortgage lender will have to approve the transaction and will only do so if they are satisfied that it will not affect the monthly payments being made to them. This process is likely to cause the most delay in the transaction and therefore it is advisable to speak to your mortgage lender as soon as you have decided you wish to transfer equity.
Although we would recommend that all parties involved in a transfer of equity are represented by a solicitor, only the party buying out other parties must be legally represented. Seeking independent legal advice is always recommended when considering a transfer of equity.
A transfer of equity may also have some further implications surrounding Capital Gains Tax and Stamp Duty Land Tax. You can discuss your specific situation with your solicitor who will be able to advise you as to whether this applies to your transaction.
If you wish to find out some more information regarding a transfer of equity transaction, please contact our Client Service Advisors who will be able to assist you further.