What is a Transfer of Equity ?
A Transfer of Equity is, in simple terms, a change in the ownership of the property.
This can happen in various ways and no two Transfers are usually the same. The most common examples include when a couple marries / cohabitate and move in together, or conversely, if they divorce / separate and one party chooses to leave the home. In either situation, a transfer of equity allows for the changing names on house deeds, to reflect the property’s new ownership situation.
It should be noted that a transfer of equity should not be confused with a gift. A transfer of equity is where the legal ownership of the property changes hands but the original owner remains on the title.
The time taken to complete a Transfer of Equity very much depends on the nature of the Transfer. Simple Transfers that do not involve a mortgage or any other outside factors can complete within 4 – 6 weeks. Where there is a mortgage involved, the timescale will be at least 8 – 12 weeks. It can be even more complicated if there is more than one mortgage on the property or the property is leasehold. Likewise, if the transfer is required as part of a separate legal process – for example, a divorce that is being resolved by the Court – the transfer may be held up until all matters have been resolved.
What if there is a mortgage on the property?
If there is an existing mortgage in place and you intend to pay it off before the equity is transferred, or re-mortgage with another lender, there is no need to tell your existing mortgage lender. If you intend to keep your existing mortgage after the transfer of equity, you will need to obtain their consent to the transfer.
The lender will need to be satisfied that either you (as a sole owner), or you and the new joint owner, will be able to pay the mortgage. It is always best to have a conversation with your mortgage lender prior to considering a Transfer of Equity.
Once the mortgage instructions are received by your solicitor they will check the title of the property. This is to ensure that any restrictions affecting the transfer of the property are complied with. If the property is leasehold, the consent of the landlord to the transfer may also be required.
Tax Implications
A transfer of equity can give rise to the payment of stamp duty land tax. The specific tax implications of an equity transfer depend on the nature of the transfer. For further advice you should consult a tax advisor.
Can you transfer equity to someone under 18?
Legally, someone under 18 can’t hold the property but setting up a trust deed would allow a trustee to hold it until they turn 18 and the equity is transferred to them.