Transfer of Equity

What is a transfer of equity?

A transfer of equity is when you remove or add the names of one or more people to the legal title or ownership of a property. Transferring this equity could be total – in which you transfer the whole ownership – or partial.

This could be down to the fact a couple that shared ownership of a house has split up and one person needs to be removed. It could also happen when a homeowner wants to add a partner to the title deeds. A transfer of equity is also necessary when a property is being gifted.

Equity is the value of your property after any outstanding mortgage has been deducted. For example, if your home is worth £200,000 and you owe £100,000 on your mortgage, you have £100,000 equity.

This means that if you’re adding a partner to the ownership of the home, you’ll be able to transfer half of the equity you have in the house – £50,000 rather than half the home’s full value.

What is the process of transferring equity?

For a transfer of equity, you’ll need an official copy of the property’s title. This will allow your conveyancer to check if there are any mortgages or other restrictions on the home. They will then prepare the transfer deed.

Then, if there is no mortgage, all of the property owners – current and new – sign the transfer deed in the presence of a witness. Your conveyancing solicitor will then register the transfer deed with the Land Registry.

But if there is a mortgage on the home, you’ll need your lender’s permission for a transfer of equity. When you add a new owner, they then become liable for the mortgage repayments. Your lender will need to check that they are able to afford the repayments.

And if you’re removing someone, your lender will have to check that the remaining owner is able to afford the mortgage repayments themselves.

After you receive permission in writing from your lender, you can go ahead with signing the transfer deed and letting your conveyancer register the new ownership with the Land Registry.

But if your lender refuses permission, you will need to pay off the remainder of the mortgage before you can proceed. This can be done by paying in cash or remortgaging with a lender who does agree to the transfer.

How long does a transfer of equity take?

If your situation is a simple one, it won’t take long to transfer equity. If you and the other owner – whether they are being added or removed – sign the documentation together, your only waiting will be for the Land Registry to receive them and confirm the transfer.

When a mortgage is involved in the transfer, it will usually extend the timeline. You’ll have to wait for your lender to approve or refuse your equity transfer. If they don’t agree to it, you’ll also have to wait while you find another lender or pay your existing one off.

Meanwhile, you may also face delays if you are removing a partner and they don’t consent to the transfer.

How much does transferring equity cost?

The cost of a transfer of equity will depend on your specific circumstances.

You’ll have your conveyancing costs, which will typically be between £100-£500. These can depend on how simple your transfer is – for example, whether you have to remortgage to pay off your existing home loan. Your property’s value will also influence your conveyancing costs.

If there is a mortgage remaining on the house, you may face fees by your lender. You could also have a product fee on a remortgage.

Is Stamp Duty payable on a transfer of equity?

You may have to pay Stamp Duty in certain cases, such as if the property is split unequally between owners or if a mortgage is transferred. Until 31 March 2021 in England and Northern Ireland, there is no Stamp Duty to be paid on properties up to £500,000.

This means that if your transfer doesn’t reach values of this amount, you won’t have any Stamp Duty to pay.

The rules are different in Scotland and Wales. Your conveyancing solicitor will be able to explain this and any other costs associated with an equity transfer.