Do you jointly own a property with one or a number of other people?
You may want to transfer full or part ownership to yourself or another person.
Transfer of equity simply means the transfer of a part or all ownership rights from one person to another.
The process may be a little complex but this write up will give you insights into what transfer of equity is and what you will need to execute it.
Equity is the net value of a property. This is different to the gross value of the property because itconsiders outstanding mortgages.
Equity is the value of the property less the amount of outstanding mortgage.
Assuming that the value of a property is £1,000,000 and the outstanding mortgage is £400,000. The equity of such property is £600,000.
Therefore, owning the property meansyou own the equity. However, the property can be jointly owned or you can transfer part of the ownership (equity) to another person.
If you and a partner own 50% each in the above property, you would each own £300,000 equity.
Other reasons for a transfer ofequity could be gifting ownership or part ownership to a family member orchild, taking a name off the mortgage, transferring equity for tax purposes, transferring equity from one spouse to another and many other reasons.
Transfer of equity can be straigh tforward if all the terms and conditions are clear between the people involved in the property. A transfer of equity document is drawn by your solicitor, you and the person you are transferring the equity to will sign the document and it is sent to the Land registry.
Your solicitor will advise if the situation is more complex and how to proceed.
If you are adding a spouse or partner to the deed (transfer of equity), you both need to decide on the type of joint ownership.
There are 2 types of joint ownership; Joint tenant and Tenant in common.
Joint tenants have an equal share in the property. On the demise of one person, their 50% share reverts to the other partner and the property becomessolely owned by the surviving partner.
As a joint tenant, you can't pass onyour half of the property to anyone else but your partner when you die.
With tenants in common, if oneco-owner dies, their share of the property is passed on as written in the termsof their will. It doesn’t revert to the co-owner by default.
Your conveyancing solicitor will advise you on the right joint tenancy options.
If you aretransferring equity and there is a mortgage on the property, you will have to be released from the terms and conditions of the mortgage.
Also, the person you add to the title will become jointly liable for the mortgage.
Your solicitor will ask for the consent of the lender to carry out the transfer.
If the equity being transferred is on a leasehold property, your solicitor will obtain a copy of the lease, contact and inform the freeholder of the change of ownership. Some fees may be applicable.
Also, a change of ownership may berequired at the Land Registry.
You may need to pay stamp duty depending on the ‘consideration’ and the nature of the transfer.
Your solicitor will help you determine if stamp duty is required to complete the transfer of equity.
The time it takes to complete a transfer of equity depends on factors like mortgage lenders and freehold or leasehold status.
A simple transfer of equity can be completed within 2 to 4 weeks. You can speed up the process by getting both parties to sign the documents at the same time.
Your solicitor sends the document to the Land and Registry for confirmation.
However, a more complex situation may likely increase the period of completing the transfer.
The cost oftransferring equity can depend on the circumstances and the value of the property, if you are adding, removing or replacing someone on the deeds. Also, whether the property is leasehold or freehold.
As the value of the equity changing hands increases, so will the cost of the service. Other factors, like the number of mortgages on a property, can also make a difference. You may have to pay a transfer fee to your bank if the property has a mortgage.
Transfer of equity can be stressful and time-consuming, so we recommend you get professional help from a solicitor who is experienced in this area.
Salisbury Law conveyancing solicitors can help.
Contact us at
3Fiddlebridge Lane, Hatfield, Hertfordshire AL10 0SP