Transfer of Equity Explained

Equity is commonly used to mean the amount of money a property owner has tied up in that property. It is often described as positive, meaning more money than when they brought the property if the price has gone up, or negative which means vice versa. However, in legal contexts, it specifically refers to the percentage of the property owned by a property owner. In some situations, an owner may wish to transfer equity to another party. Here’s everything you need to know about transfers of equity:

What is a transfer of equity?

Transfer of equity is a legal process through which ownership of a jointly owned property can change hands without a sale, with at least one of the original owners remaining the same. This might happen for several reasons, such as a couple separating and needing to divide assets, one owner buying out another, or for tax purposes between family members.

How is an equity transfer done?

You can contact a transfer of equity solicitor to help with the process of changing the title deed and updating the land registry. A conveyancing lawyer will review the existing deeds and prepare the transfer documents. The parties and the solicitor will then meet to sign the transfer deed in the presence of a witness. A mortgage lender with a stake in the property’s ownership, such as mortgage providers or building societies must give their written consent to the transfer. Finally, the land registry is notified, which allows the party to transfer equity.

It’s worth noting that the legal advice from the conveyancing solicitors will likely incur some legal fees for their time.

How long does a transfer of equity take?

The process’s length can vary greatly. If all parties agree, then the process can be quite smooth and short. However, one owner of a property may have a dispute with another, which can extend the process as any disagreements are either litigated or settled, which can incur further transfer of equity costs via extended legal battles.

Are there any other costs?

Sometimes, stamp duty tax may be applicable to a transfer of equity. Stamp duty would only be applicable is there is a mortgage tied to the property in question. If a new owner is added to a deed and they take on some of the mortgage debt, then they will need to pay stamp duty equivalent to 2% of the amount of the mortgage they take on above £125,000, half of the stamp duty threshold (£250,000). For example, if a new owner took on half of a mortgage with £300,000 left to pay, they would have to pay Stamp Duty on £25,000 (50% of £300,000 is £150,000, minus £125,000 equals £25,000).

DFA Law provides conveyancing and transfer of equity services that will help ensure the process goes as smoothly as possible, helping to give you peace of mind that your property is in the right hands. Fill in our contact form or give us a call on 01604 609560 to find out more.