Transfer of equity – solicitors, gifts, and the process
A transfer of equity lets you add official owners to or remove them from the title deed of a property. These owners then effectively become or stop being shareholders in that property.
This means they will either become responsible for paying off the mortgage or stop being responsible for paying off the mortgage (when they previously had been).
You can also use a transfer of equity to “gift” partial ownership of a property to someone. This is most commonly used by parents to give children a start on the property ladder.
If you’re thinking about transferring equity in a property you own – or you are about to have equity transferred to you – here is everything you need to know about how it works:
What Is Equity?
Equity can be most easily thought of as the amount of a property you have already paid for.
For example, with a mortgage, you might have paid off £100 000 of your total £300 000 mortgage. You could then say you had £100 000 equity in your home.
What Is A Transfer Of Equity With A Mortgage?
A transfer of equity involves adding people to or removing people from the list of owners of a property. The people who own a property are listed on that property’s title deed.
Despite what it sounds like, with a transfer of equity, no money is really being moved around. Instead, a change of ownership means the people responsible for paying the mortgage will change.
This differs from a property sale. In a property sale, all of the names on the title deed will change. In a transfer of equity, at least one of the original names on the deed will stay the same.
Because those responsible for paying the mortgage (and thus their group ability to meet their financial obligations) will change in an equity transfer, your mortgage lender will want to perform fresh credit checks and generally confirm they are happy everyone can still meet the repayments.
It’s worth remembering that a transfer of equity can go both ways – adding and removing people from the title deed. The two most common examples are when a couple gets married and moves into one home – and when a couple gets divorced and one of them moves out.
What Is A “Gift” In Terms Of Transfer Of Equity?
There is one additional “type” of transfer of equity. This is known as a “gift” and is largely just what it sounds like. You are choosing to gift equity in your property to someone else.
The most common example is when parents gift equity to one of their children. This lets the child get somewhere on the property ladder without them needing to have any money to invest.
Do You Need A Solicitor To Do A Transfer Of Equity?
The process for completing a transfer of equity needs solicitors (there are large sums of money and legal requirements involved after all) but it is much more straightforward than selling or buying property.
There is also the fact that mortgage lenders don’t normally work without everyone involved having professional representation. Because in most property equity transfer situations there is a mortgage involved, you may need a solicitor if you want to be able to continue to borrow.
How Do I Complete A Transfer Of Equity?
The main part of the transfer of equity process happens through a form supplied by the Land Registry called the TR1 form.
If you are lucky enough to not have a mortgage on the property, you can simply get everyone involved to sign the form, pay any Stamp Duty Land Tax required, and send the form (plus a couple of others) off to the Land Registry.
However, if there is a mortgage involved, your lender will need to agree to the transfer. Any new people added to the property’s title deed will need to have their finances checked out or, if people are being removed, those remaining will need to be reassessed.
Most of the time, your lender will insist on a remortgage.
Find Solicitors For A Transfer Of Equity
When it comes to a transfer of equity, solicitors are required when mortgage lenders are involved. The rest of the time, they’re simply a smart idea.
But good conveyancing solicitors can be difficult to find. Why not let us do the hard work for you?
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