17 Apr, 2020/ by Homeward Legal /Transfer of Equity
In this article we'll explain the concept of Transfer of Equity. What is a transfer of equity, whether you pay stamp duty on transfer of equity, how long does it take, how it works…all of these questions and more will be answered.
At the time of writing, the coronavirus crisis means that you may have a degree of anxiety or uncertainty over your transaction. Rest assured that this particular field of conveyancing is relatively simple and, most importantly, able to progress as normal with no need for face to face contact.
What is a Transfer of Equity?
A Transfer of Equity is the process of adding one or more people to the legal register of a property, or conversely removing one or more people (other than the individual that instructed the transaction).
Seeing as ‘equity' represents the difference between the current market value of the property and any mortgage borrowing still to pay, transfer of equity effectively transfers the ownership of this surplus (or, in the case of negative equity, deficit) to a new individual(s). So, if a property is worth £500,000 and you have an outstanding mortgage of £300,000, you have £200,000 of equity in the property.
You may be looking to transfer equity for a number of reasons, including marriage (adding someone to the register) or divorce (removing them). You may want to add a family member or child to the register as a gift, transfer equity for tax reasons or simply take somebody's name off the register.
How long does a Transfer of Equity take?
All being well, 4-6 weeks. Depending on several factors, such as whether you have a mortgage or not. Homeward Legal's conveyancing solicitors are well versed in the ToE process and will ensure that things are completed as swiftly as possible.
How does Transfer of Equity work?
A conveyancing solicitor will first look at the official title for the property and use it to check whether there is a mortgage. They'll then review the title or property deeds, check the identity of the clients and prepare the transfer deed.
If, in the unlikely event, there is no mortgage liability associated with the property, the existing and new registrars sign the transfer deed before the conveyancer registers the new owners at the Land Registry. In most cases there will be a mortgage associated with the property, in which case you'll need permission from the lender to instruct a transfer of equity transaction.
If the property is freehold, additional actions will be required. Your solicitor will ask for a copy of the lease, contact the freeholder to notify them of the change in owners, get their consent and then progress with the above steps.
Do you pay stamp duty on Transfer of Equity?
If a property is jointly owned and the equity is split equally, no stamp duty will be payable. However, if one person takes on a larger share, this may change, for example if the equity being transferred is greater than the SDLT (stamp duty land tax) threshold.
An SDLT Form may need to be completed even if no stamp duty is owed and returned to HMRC within 30 days of completion. Your Homeward Legal solicitor will be in regular contact and advise you of all steps required to complete your transaction as early as possible.
If you would like to go ahead with a Transfer of Equity process, now is absolutely the right time.