Transfer of Equity Conveyancing

What does equity mean?

Equity is simply the residual value of the property after any mortgage is deducted from the current market value.

For example, if your property is worth £250,000 and you have an outstanding mortgage of £100,000, you have £150,000 equity in the property.

Why might I need to transfer equity?

There are a number of reasons for transfer of equity, such as marriage or divorce. You may want to transfer equity to your son or daughter, or to another family member. 

The reasons for transfer of equity are unique to every person and property, and Homeward Legal are sensitive to the fact there will be multiple parties involved in such matters. You can rest assured that your transfer of equity will be dealt with discretion and care, and in a timely manner.

What if there is no equity or negative equity in the property?

It is possible to find yourself in a ‘negative equity' situation when the outstanding mortgage exceeds the current market value. This could happen when a buyer has taken out a high LTV (Loan to Value) mortgage and the value of the property has subsequently fallen.

In these circumstances, the future owner will need to ensure they have made suitable arrangements with the mortgage lender. Homeward Legal's nationwide panel of conveyancing solicitors are experienced in working with owners and lenders to ensure this process runs smoothly.

What is the transfer of equity process?

A transfer of equity can be incredibly simple, as long as all of the terms and conditions are clear between the parties. Once all parties are in agreement, an official document called a Deed of Transfer is drafted for all parties to sign. Any existing mortgage formalities are also completed. If the new owner or part-owner is taking out a new mortgage, then your transfer of equity solicitor would also represent the lender's interests in completing this.

Transfer of equity can have an impact on stamp duty, capital gains tax and land tax, and matters are often accompanied by a remortgage too. If you have a mortgage, you are obligated to inform the lender if the names on the deeds are changing. You cannot change a name on the mortgage without changing the deeds, and vice versa. In these cases, Homeward Legal will treat the equity transfer and remortgage as one piece of work, aiming to complete this as soon as possible.

How long does a transfer of equity take?

The lengthiest part of the transfer of equity process usually surrounds the mortgage lender assessing the eligibility. If you are transferring equity without a lender being involved, the process can be incredibly quick. The more complicated the transfer or equity, the longer the process can take. But, if both parties are agreed and can sign the document promptly, it can be a relatively smooth process. 

The post-completion formalities with an equity transfer are similar to those carried out on a purchase. An SDLT (Stamp Duty Land Tax) return may need to be completed (even if no stamp duty is due) and sent to HMRC within 30 days of completion.

The next stage is to register all interests and charges over the property at the Land Registry, at which point the property is formally registered in the new party's name(s).

Do you pay stamp duty on transfer of equity?

Whether you need to pay SDLT or not depends upon the ‘consideration' and the nature of the transfer of equity. Consideration refers to the amount of the property you will take from the previous owner. Consideration includes both equity (the value of the property) and the value of the mortgage. 

If the property is a ‘gift' and there is no mortgage, or the property is split equally between two people, there will be no stamp duty to pay. Similarly, if couples are legally separating or transferring equity by court order, there is no need to pay SDLT. 

However, in most cases when the property is split unequally, a mortgage is transferred, or the amount being transferred is over the stamp duty threshold, there may be some tax to pay. 

Whatever your circumstances, your transfer of equity solicitor will explain any expected fees and payments to help you take the right course of action for your transfer of equity.

Is there a Land Registry fee for transfer of equity?

There is a Land Registry fee for transfer of equity, which costs between £20 and £125 depending on the price bracket your property falls into. You will also be charged a nominal fee for the official copy of the register of title from the Land Registry, as well as online ID checks.

What are the solicitor costs for transfer of equity?

Your solicitor's transfer of equity costs will vary depending on the value of your property, whether the property is leasehold, the mortgages on the property, and whether you need to remortgage. 

But when you complete a transfer of equity quote with Homeward Legal, the costs will be explained to you. To find out how much a transfer of equity solicitor costs with Homeward Legal, simply fill in the ‘Quick Quote' form after you've selected ‘Transfer of Equity' from the dropdown conveyancing service menu below.