A transfer of equity refers to a legal process of adding or removing someone as the owner of a property. It is used for several reasons, including divorce, separation, buying someone out or for tax reasons.
What is meant by equity?
Equity means the percentage of a property that a person owns and describes the value of the property, minus any outstanding mortgage on it. When a person gives up ownership of a property, they receive their share of equity.
Although it is a legal process, an equity transfer is often straightforward. The current market value of a property will probably have to be established first so that the correct amount is transferred. When there is limited or no equity in a property, the property can be remortgaged with the existing lender or a new one.
When is a transfer of equity used?
The most common reason for a transfer of equity is the breakdown of a relationship when a couple has to divide up their assets and there is a transfer of equity from two to one. It could also be used in the case of a new relationship, when you want to add a new partner to the deeds of your property, so a transfer of equity from one to two. You may also want to do a transfer of equity from two to two, when a former partner is removed and replaced with another person.
In modern times, more and more people have bought properties jointly with family and friends and a transfer of equity may be used when one party wants to buy out the other.
Lastly, it can be used for tax efficiency, with parents transferring equity to their children. This last example can be described as a gift, but there are tax implications and advice should always be taken on this.
Any transfer of equity has to leave a minimum of one legal property owner and a maximum of four.
The Government advises that property owners should use a professional conveyancer in all cases, so they are covered in case anything goes wrong. When a property has a mortgage on it, the lender will often insist on this. Fortunately, there are many conveyancers such as https://www.samconveyancing.co.uk/news/conveyancing/transfer-of-equity-process-3894 with experience of handling the transfer of equity.
How does it work?
A solicitor will look at the title deeds of the property from the Land Registry, before preparing the transfer deed documents. They will then arrange for all parties to meet and sign the documents in front of a witness. They will also let any lenders know and get their written consent before registering the transfer with the Land Registry.
