What is a Transfer of Equity?
A Transfer of Equity is the legal term for the process of transferring ownership of a share or interest in a property from one person to another. Often this process can be complex:
- It may involve several people
- The property must be registered with the Land Registry
- Stamp Duty Land Tax may be due
- A mortgage lender could be involved
This complexity is why you should entrust your transaction to a conveyancing solicitor.
How do I know if I need a Transfer of Equity?
The start or end of a relationship is the most obvious time when this is required:
- Marriage, divorce or legal separation
- Start or dissolution of a civil partnership or legal separation
A parent can also add a child to the title deeds of their property, often as a result of tax planning. You must talk to your mortgage lender about any equity transfer before starting the process.
How will the property share be split?
How the property share is split will depend on the new ownership. Here’s an example, In a divorce where a property is owned 50-50, the half of a couple giving up his or her share will receive half of the equity. Equity is the property’s value after any outstanding mortgage has been taken into consideration. The house is worth £450,000 and £225,000 is still owed on a mortgage. That means the available equity is £225,000. The outgoing party should receive £112,500. The spouse who is staying in the home must then remortgage the property in their own name so they can pay their departing other half their share of the equity. Remortgaging will also allow the party staying in the family home to be registered as the sole owner. If the property’s value is the same or less than the mortgage, you’ll need an experienced conveyancing solicitor to negotiate a fair share of the equity.
Can I do my own Transfer of Equity?
As with many types of legal work, you can do your own transfer. It’s easier if there’s no mortgage. However, an equity transfer can be complex. That’s why having an expert conveyancing solicitor by your side is money well spent.
How does solicitor transfer the equity?
The property lawyer you instruct through Homeward Legal will send you a Transfer of Equity pack to complete and return. Your solicitor will then negotiate the terms of the transfer with the other party’s solicitor. When both sides have agreed the terms, a Deed of Transfer detailing the legal formalities is drafted and each party will sign. If you’re remortgaging, your solicitor will liaise with the lender before you sign the Deed of Transfer.
Does my solicitor also work for the mortgage lender?
As in any type of conveyancing that involves a mortgage, your solicitor must act both on your behalf and on behalf of the lender. This allows he or she to represent both of your interests in the equity transfer.
Do I have to pay Stamp Duty on a Transfer of Equity?
Stamp Duty Land Tax may be liable on a property that is sold or gifted. Your solicitor can advise if your Transfer of Equity will also incur stamp duty. He or she will complete the stamp duty form on your behalf and return it to HMRC with any outstanding duty. The form must be submitted even when no stamp duty is due. These are some of the exemptions:
- Following a divorce or dissolution of a civil partnership
- Where a share of property is gifted with no money changing hands; for example, a parent adding a child to a property’s title deeds
What happens now?
Your Transfer of Equity is done when all parties sign the Deed of Transfer and your solicitor returns the stamp duty form to HMRC. The solicitor will then register all new interests and charges over the property at Land Registry. This will formally register the property in the new owners’ names.