What is the process of Transfer of Equity?
A Transfer of Equity happens when a property's owner adds or removes someone to or from the title deeds of their home. It doesn't necessarily involve the transfer of money as the name might suggest.
The whole process can take around six weeks to complete, although each transaction can be unique and the time taken to complete could take longer.
This is certainly the case if there is a mortgage on the property, as you have to wait to receive written confirmation from any lenders involved before the transfer can go ahead. Also, it can become an increasingly complex process if parties are in disagreement, such as couples who are divorcing or separating.
What happens when you transfer equity?
If you are transferring equity as part of a divorce or separation, each person will have their own solicitor representing and advising them. However, irrespective of the number of parties involved, the process remains roughly the same.
There are five key steps that you and your solicitor have to take:
• Obtain a copy of the title deeds and check for any restrictions on the property including a mortgage.
• Prepare the transfer documents including completing the TR1 form.
• Notify third parties such as a mortgage lender, bank, or building society and get their written consent.
• Sign the deeds with an independent witness.
• Notify the land registry which will involve a fee that is dependent on the value of the property.
Gifting property to your children
One of the most common forms of property ownership transfer on your main property is to gift it to your children as a way of giving them a foot up onto the property ladder.
This is a useful way to reduce the impact of inheritance tax, but it is important to consider the regulations and potential financial impact before going down this road.
For instance, if you die between three and seven years after gifting your property, your children will still have to pay tax, but not the full 40% if the property is worth more than 350K. This is known as “ tapered relief”.
After you have gifted the property, you will not own it and will not be able to live there rent-free. This process is not without its risks, for instance, it could be part of a divorce settlement if your children were to fall out with their spouses.
Why do people transfer their equity on their property?
There are several other reasons why you might want to transfer equity in your home apart from gifting property to your children. These may include:
• Divorce or separation
• Entering into a new relationship
• Resolving joint ownership
• Tax efficiency
What if there is a mortgage on the property?
It is important to note that if someone is added to the title, they will become liable for the mortgage.
The mortgage lender then has to run checks to ensure that the person is able to meet the mortgage requirements and afford the monthly payments. In order to avoid this, some people, if they can afford to do so, will pay off the mortgage before transferring equity.
Will I have to pay Stamp Duty Land Tax?
There are a number of situations where you may need to pay Stamp Duty unless the transfer of equity is the result of a divorce, legal separation, or the dissolving of a civil partnership. However, if a share in a property is transferred when marrying, entering into a civil partnership, or co-habiting, you may have to pay Stamp Duty.
How can GloverPriest help?
Transferring equity can be a straightforward process if the property is wholly owned by the parties listed on the title deeds and when everyone is in agreement, but if this isn't the case it becomes more complicated and can take longer for the process to complete.
If you need to instruct a conveyancing solicitor, please do not hesitate to contact us today to see how we can help you. Complete our enquiry form.
0121 794 5814