There are many reasons why somebody would want to transfer equity in a property. The most common reasons are adding a spouse to the property deeds after marriage, removing a spouse from the deeds following a divorce, or gifting a share or the totality of the equity in the property to a child or other family member.
How Can Equity Be Transferred?
In order to transfer equity, a transfer of equity solicitor needs to be instructed. They will ensure that the process is completed correctly in order that the legal updates with the Land Registry and mortgage lender are performed and all interested parties understand and are happy with the change.
The solicitor will verify the identities of all parties and liaise with the mortgage lender if one exists. They will obtain the property’s title deeds from the Land Registry and prepare all required documentation, including the ID1 and TR1 forms and any paperwork related to Stamp Duty Land Tax that may be payable upon completion of the transfer.
They will arrange for independent legal advice to ensure that the person who is surrendering their equity understands what they are doing and that they are not being subjected to undue pressure to do so.
They will ensure that all legal documentation is signed and witnessed and be responsible for registering the new owner with HM Land Registry.
When Can Equity Be Transferred?
Equity can be transferred at any point that a home-owner wants to surrender their share or the entirety of a property to somebody else, either for a fee or without receiving any form of financial recompense or consideration for it. As detailed above, this typically happens when an individual experiences a significant change to their personal circumstances, but it can be at any point in time that feels appropriate to the individual.
How Much Does It Cost To Transfer Equity?
Many transfer of equity solicitor firms offer this service on a fixed price that recognises the complexity and risk associated with this activity balanced against the value of the asset that is changing hands. The cost is usually less than the conveyancing activity required to purchase a property, as is the duration of the process.
In most circumstances, the person who is being added to the title deeds of the property will be liable to pay Stamp Duty Land Tax on the value of their share that is over the Stamp Duty threshold. The exceptions are where the property has been gifted and there is no chargeable consideration or if the transfer is occurring as part of an agreement or court order made as a result of a divorce or separation where the other partner is retaining their share. If Stamp Duty is payable, it is at market rate, so for a property of significant value, the costs can be considerable.
The final cost is that which is charged by the mortgage company as an administration fee for updating the ownership details on the mortgage and ensuring that they are content that the new owner can continue to make the payments. The mortgage company may also require that a local authority search is carried out to confirm the condition of the property or that indemnity insurance is purchased.