Transfer of Equity Explained

A Transfer of Equity takes place when a property owner adds or removes one or more people from the title. This guide helps explain the process, when a Transfer of Equity is required and what it involves.

A Transfer of Equity takes place when a property owner adds one or more people to the ownership or legal title of the property, or when they want to remove one or more people from the title. A Transfer of Equity doesn’t always have to involve transferring any actual money. Confused? You won’t be when you read In-Deed’s comprehensive guide to when a Transfer of Equity is required and what it involves.

What is a Transfer of Equity?

A Transfer of Equity is when a jointly owned property is transferred to a single one of those owners, or when a single owner adds one or more people to the ownership of the property. Equity is the legal term for how much of the property you own. Or, to put it another way, its value minus any outstanding mortgage. So, for example, if your home is worth £350,000 and your outstanding mortgage is £190,000, your equity is £160,000.

When would I need a Transfer of Equity?

A Transfer of Equity adds or removes one or more people from the legal title or ownership of a property. It is often done when a couple marries or enters into a civil partnership, or when either of those relationships is dissolved. The legal title will then reflect the new ownership of the property. That ownership can be split 50-50 or divided in another way according to what is required. When one party is outgoing – that is, relinquishing their share – they will receive their percentage share of the equity (where there is any). A parent may also add a child to their property ownership, which would be treated as a gift where no money changes hands.

What if there is no equity or negative equity?

A Transfer of Equity often involves one person “buying” the other out of their share of their home; for example, when a relationship ends and one half of the marriage or partnership intends to stay in the home, they will then buy their other half’s share. This can be done by remortgaging with an existing lender or moving the mortgage to a new lender completely. The finance is provided by the lender to “buy out” the other person and the Transfer of Equity will the reflect the new legal ownership.

Do I need a solicitor to arrange a Transfer of Equity?

To protect your own interests, it is always better to engage a solicitor when the legal ownership of your home is involved. Some Transfers of Equity are very simple to process, but others can be complicated and require more work. In-Deed can engage a solicitor to act on your behalf and ensure your rights and finances are protected.

What does the Transfer of Equity involve?

When you instruct a solicitor through In-Deed, you will receive a Transfer of Equity pack to complete and return. Your solicitor will then liaise with the other party’s legal team if another solicitor is involved. Once all parties have agreed on the Transfer of Equity, a Deed of Transfer will be drafted for each party to sign. The Deed of Transfer will contain all the legal formalities of who know owns what. Where a remortgage or new mortgage is required, the formalities for this lending should also be completed by the time the Deed of Transfer is signed.

Will my solicitor work with my lender?

Your solicitor will act on your behalf for both the equity transfer and any mortgage/remortgage as one case. Your solicitor also has to represent the interests of the lender when completing the legal formalities, as happens in all conveyancing.

What happens now?

The Transfer of Equity is complete once the Deed of Transfer has been signed by everyone involved. Your solicitor will complete the transaction by returning a Stamp Duty Land Tax return to HMRC (even when no stamp duty is to be paid) and will register all new interests and charges over the property at HM Land Registry. Now the property is formally registered in the names of the new owners.

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