What Is a Transfer of Equity?
A transfer of equity is a change in the co-ownership of a property. You might arrange a transfer of equity if:
- You are adding a spouse or partner to your mortgage
- You and your partner separate or divorce, and one of you keeps the property
- Adjust a co-owners share in the property
A transfer of equity is where you change the ownership status of your property. This might be appropriate if you marry and want to add your spouse as a co-owner, for example. Or, on the other hand, if you purchased the property with a partner and the relationship later ends, the terms of the separation might involve one party being removed as an owner.
Also, the property might have originally been purchased under a pooled ownership arrangement: i.e. friends or family clubbing together to fund it, and so, a transfer of equity might be needed if one or more owners want to buy the others out later on.
What is equity?
‘Equity’ refers to the value of your property that you actually own.
If you have a mortgage, the value of your equity is the difference between the current value of your property and the amount you still owe on that mortgage.
Property value - outstanding mortgage = equity.
For example, if your home is valued at £200,000 and the amount outstanding on the mortgage is £150,000, your equity in the property is £50,000.
What is involved in a transfer of equity?
Even though most transfers of equity are straightforward, it’s still important to instruct a conveyancer to handle it on your behalf (in fact, if there’s a mortgage involved, the lender will insist on it). This will ensure that changes to the legal title of your property are processed correctly, to avoid any issues or disputes further down the line, and to ensure your interests are protected.
The basic conveyancing steps involved are as follows:
- Obtaining the title deeds – Your solicitor or licensed conveyancer will get an official copy of the title deeds for the property from the Land Registry. They will review this, check the details of the mortgage lender and also check the identities of each party.
- Drawing up the transfer document – The transfer deed sets out the new terms of ownership, and all parties involved (current owners and those to be removed or added) will need to sign in the presence of a witness.
- Obtain the lender’s consent – The solicitor will get written confirmation from the lender that they agree to the proposed title deed changes. If the current mortgage is to remain in place after the transfer, the lender will also need to be a party to the transfer deed.
- Land Registry notification – Your conveyancer registers the transfer deed at the Land Registry.
How long does a transfer of equity take?
Usually, the whole transfer of equity process takes around 4-6 weeks to complete. If your lender is being slow in sending through their consent to the transfer, an experienced conveyancer can be invaluable in keeping things moving.
How much does a transfer of equity cost?
Solicitors’ fees for a transfer of equity are usually based on a range of factors, including the value of the property, whether you are also remortgaging and if the property is leasehold. Typically, these fees are between £100 and £500 plus VAT at 20%.
On top of this are disbursements which are the charges your solicitor incurs on your behalf. For a transfer of equity, these usually include online ID checks and obtaining the official copy of the property title (a few pounds each).
In addition, there is the Land Registry fee of between £20 and £125 depending on the property value. Many mortgage lenders also charge a ‘change of parties fee’ and Stamp Duty may also be payable (see below).
Do you have to remortgage for a transfer of equity?
When you originally applied for your mortgage, the lender will have looked at your income and expenditure to check your ability to meet the repayments. A transfer of equity means changing the people responsible for paying the mortgage. So, the lender will need to re-examine the circumstances of everyone you want to be on the mortgage to make sure it is still affordable. The original lender will discuss with you whether a new rate arrangement might be appropriate.
If you are shifting from one mortgage to another with the same lender, it’s classed as a ‘product transfer’. But if you are simultaneously going through a transfer of equity, you will still need to go through the remortgage process. This is because there are legal formalities to go through as the owners of the property have changed, so the new mortgage will need to be resecured on the title against the different set of owners. Alternatively, if you decide that another lender offers the best deal for you and you want to switch, you’ll also need to have a remortgage. You can read more about this in our remortgaging guide.
How is Stamp Duty calculated on a transfer of equity?
You don’t pay Stamp Duty if you transfer an interest in the property as part of an agreement or court order because of divorce or the dissolution of a civil partnership.
However, in most other situations, you must pay Stamp Duty. Usually, the Stamp Duty rate ranges from 2% to 12% of the equity, depending on its value.
The government’s SDLT calculator is an easy way of working out the amount payable for most transactions.
Want to know more about all aspects of conveyancing and property transfers? Head on over to our Help and Advice section or contact us directly for any queries and questions.