A transfer of equity is a transaction which, unlike a sale and purchase, simply adjusts the ownership of a property. It is commonly used to add a spouse or partner, to remove one partner in the course of a divorce, or to adjust a co-owner’s share. Equity is the unencumbered value of a property, which means the difference between the current value of the property and any outstanding loan secured on it.
How Does a Transfer of Equity Work?
It’s usually a very straightforward process, but it does need to be carried out by a solicitor or qualified conveyancer, because it involves important legal measures to ensure that the new ownership status is valid and can’t be disputed.
The first step is to appoint a solicitor. You can ask friends or family for recommendations or you can simply shop around. A popular alternative which will save you time and still give you a wide choice is to use a concierge service such as Sam Conveyancing. This will give you access under one roof to a range of experienced conveyancers. Be sure to obtain quotes which include, as far as possible, all your legal costs. You and the person who is being added to the title deeds can use the same solicitor but anyone who is being removed needs their own separate representation.
Once you have your transfer of equity solicitor in place, there isn’t very much for you to do until the documentation is ready for signature. The conveyancer will contact the Land Registry and get hold of an official copy of the property title. This enables them to confirm any outstanding mortgage or other charges that have been placed on the property.
What If There is an Outstanding Mortgage?
If there is still a balance to repay to your mortgage lender then they will need to consent to the transfer. This is because the person being added to the title automatically becomes liable for the mortgage. The lender will want to carry out the same affordability checks they would make for a new loan. Equally, if someone is being removed, the lender will need to verify that those remaining can afford the repayments. Should the lender refuse consent, then the mortgage will have to be paid off before the transfer can go ahead.
What If the Property is Leasehold?
Your solicitor will obtain a copy of the lease and apply to the freeholder for their consent. In some cases, although not all, you might have to pay a fee of up to £250.
Once these steps have been completed, the solicitor will prepare the TR1 form, which is the Land Registry document used to effect the transfer. This will identify the transferor and the transferee. All parties to the transfer need to sign the TR1 and their signatures must be witnessed. Your solicitor then files this with the Land Registry. The fee scale for filing starts at £20 for properties up to a value of £80,000 and increases in stages to £500 for values of £1 million or more. If the transfer is a gift, the fees are lower. Many transfers will also attract stamp duty
Completion is the final stage, in which funds are transferred between the parties and those who are being removed from the property title will be required to fill in and sign an ID1 form in the presence of their solicitor. This is the document that confirms their identity to the Land Registry.
The process takes 4-6 weeks on average but more complex cases can take longer.