What is a transfer of equity?
A transfer of equity is when one or more people are added or removed from a property’s title, i.e. on the deeds of ownership. You come across many different cases of transfer of equity, for example this can be an owner adding a husband or wife, a parent, son or daughter to the title or a couple that are separating and one party is being removed from the title.
A transfer of equity is perhaps most common when people jointly own property as a married couple, and they wish to dissolve their partnership i.e. divorce, or alternatively when people marry and want to put the property into the names of both parties. Parents will also look to transfer the equity of their property to their children as part of their inheritance tax planning.
Before you begin the legal work for the transfer of equity you need to have consent from you mortgage lender (if there is a mortgage) you will also need to agree if any money is being paid to the party being removed from the title or alternatively if the party being added to the title is paying any money, and how both parties will own the property at the end of the transaction, for example tenants in common or Joint tenants.
Below, we examine what happens at each stage of the transfer of equity process from start to finish.
What is the transfer of equity process?
- Instruct your solicitor
You need to instruct your solicitor to begin the legal work. You must:
- Provide your ID so the solicitor can complete their due diligence.
- Order the deed of trust (if you are going to own the property as tenants in common)
- Provide evidence of where the money is coming from that is being paid to the party leaving the title or alternatively the party who is remaining on the title.
- Solicitor’s Legal work
- Your solicitor will have to confirm that the mortgage lender has given consent, if leasehold- the solicitor also confirms with the freeholder. Without the consent from your mortgage lender your solicitor will not be able to progress your transaction.
- The Official Copy of the Register of Title are obtained from the Land Registryto state who the current legal owners of the property are, what restrictions are on the title and what charges are registered.
- The solicitor will then review the mortgage offer.
- Order the Local authority search indemnity – Some mortgage lenders are happy for you to take out local authority search indemnity insurance, some will not and expect you to obtain either an official local authority searches or a personal regulated local authority search.
- The solicitor then orders the mortgage statement for the current mortgage.
- The solicitor then sends mortgage deed to the client for signing.
- The party leaving the title will sign the ID1 form in front of the solicitor.
- The solicitor will then take out an OS1 priority search to freeze the title of the property from being able to have any changes applied to it and then complete a bankruptcy search on you.
- The solicitor then sends you a financial statement before completion detailing the transfer of equity costs and disbursements.
- Your solicitor pays any stamp duty owing to HMRC
- The solicitor then registers the details of the new owners at the land registry.
- If leasehold – the solicitor then gets notice to complete from the freeholder.
By Marcus Simpson
Digital Marketing Manager