Transfer of equity is a legal process which changes who owns property registered to their name, usually as registered owners change with mortgage holders receiving approval from lenders for such changes. When mortgage loans are involved, this may take longer as approval must first be obtained from them first.
There can be various reasons for changing property ownership, such as divorce/separation, new relationships or tax reasons. Your conveyancer can discuss all available options with you.
The Transfer of Equity and Remortgage Process
Giving your partner or children ownership in your home, adding someone on the deeds, or buying out one of the current owners can be an uncomplicated process if done with care – but it is wise to be wary of possible pitfalls, particularly if there’s a mortgage involved.
Have a solicitor help guide the transfer of equity process will make things much simpler. They’ll check the title deeds to see who owns the property, prepare documents reflecting that change and inform any third parties such as lenders of any relevant changes.
In cases where there’s a mortgage involved, approval must first be gained from the lender to proceed with a transfer. This is necessary since original approval for the original mortgage was determined based on individual circumstances and income of those living within its limits; once new owners join up on it they’ll require permission for refinancing from lender as they will re-evaluate whether their ability to meet repayments can still be maintained.
Due to these circumstances, delays may ensue and mortgage repayment may need to be accelerated in order to buy out those leaving. This may necessitate further applications with lenders, or possibly applying for another mortgage altogether – in such instances the original lender may charge a redemption fee.
Transferring equity is accomplished by changing the name on house deeds and typically also refinancing. Any changes to ownership must reflect in the mortgage agreement as well as receiving approval from your lender.
Dependent upon the circumstances, conveyancing can either be relatively straightforward or very complex. An attorney must review and sign all property title documents, prepare and execute a transfer deed and obtain any necessary lender approval (if there is a mortgage on the property), in addition to filling out and filing out the Stamp Duty Land Tax return form.
Transferring equity can occur for various reasons, including one party purchasing out another or both parties agreeing to buy out one another’s share in their relationship ending. A court order may also be necessary in this situation to enforce such arrangements.
If the departing party is taking a monetary payment in exchange for their share, this should usually be reflected through a remortgage to ensure that remaining owner can continue covering mortgage on their own. In these instances, mortgage provider must be informed as well as providing proof of income in order to verify if leaving party can afford repayments.
There can be various reasons for why someone might wish to transfer equity in a property, including divorce and one party wanting to buy the other out. Also, more and more people are purchasing properties jointly with friends or family and their agreement may include buying out one party at some later point in time. Another possible reason could be passing on someone’s share as inheritance tax purposes require this transfer.
No matter the motivation, there are some key points to keep in mind when considering transferring equity. A transfer affects both the property itself and any mortgage secured against it; mortgage lenders must approve of such changes in ownership as they will need to assess whether the new owner can meet repayments reliably.
Transferring equity with lenders usually takes longer, particularly if the mortgage remains outstanding, because lenders need to conduct additional affordability and suitability checks on any new owner/s besides what was done initially for approval of their original mortgage application. Once this has been done and an agreed-upon completion date set, solicitors for those staying will prepare a Transfer Deed reflecting changes being made, before sending it on for signature by all parties involved.
The Completion Date
Transferring equity can be a straightforward process as long as all parties involved agree with it. However, if new parties are being added or someone’s share purchased away there may be legal work necessary for completion.
Solicitors acting for those remaining in a property will typically draft a transfer deed that outlines all of the new arrangements, which is then sent over to those leaving for signature and approval. They also need to obtain consent from any mortgage lenders (if there are any) as well as complete standard money laundering checks to validate identity and confirm funds are traceable. Furthermore, disbursements (charges paid directly to solicitors for conducting searches and tasks required), disbursement costs (payable to solicitors for carrying out these services) as well as Stamp Duty may apply – these costs need to be factored in.
Remortgaging can occur simultaneously with a transfer of equity if your existing mortgage remains with the same lender. Your solicitor will prepare the necessary mortgage paperwork, Transfer of Equity Deed and notify Land Registry accordingly. For any queries on either transaction please speak with your conveyancer as they will be happy to advise.