Transfer of equity – why you might need it and how to do it
A transfer of equity you have in a property might be needed when your partner moves into your home or to gift your child some financial security.
In short, any time you want to change the legal owners of a property without going to all the effort of selling it.
At E A Harris, we’ve spent the past hundred years and more helping people in Flintshire (Sir y Fflint) handle the transfer of equity in property they own for all kinds of reasons.
“We were quite happy with the service you provided. With being local, we were able to visit whenever necessary, which we appreciate, and all phone calls were dealt with by yourselves in a friendly and helpful manner.”
(Mr & Mrs V – Property transaction)
Here is everything you need to know about the equity transfer process:
What Is Equity?
Technically speaking, equity is the value of a mortgaged property after any outstanding mortgage is taken away. Roughly speaking, it’s how much of a property you own.
You’ll often see news reports or commentary saying that people have “built up equity” in their home. This essentially means they’ve paid off a certain amount of their mortgage thus far.
For instance, if you owned a property worth £400 000 but you still had £300 000 of your mortgage to pay off, you would have equity of £100 000.
What Is A Transfer Of Equity?
Home equity (the amount you have paid into your property) is considered an asset. Unlike many other assets, equity in your home isn’t liquid. This means you can’t turn it back into money.
However, you can transfer it. At least, you can in a way. This happens when:
- Adding more owners – someone is added to the title of the property, becoming one of its owners. The most common example is after marriage when a couple move into the same home.
- Removing owners – someone is removed from the title of a property. For instance, if a couple that owns their home were to get divorced, one owner would leave the title.
- Gifting – you can also gift equity in a property to another person. Most commonly, this will be a parent adding their child to a property title.
Strangely, even though equity can be thought of as a monetary value, a transfer of equity doesn’t always involve moving that “money” around. It’s normally better to think of it as shares in a property.
If an owner gets added, the shares of any existing owners are usually split with the newcomer. If an owner leaves, the other owner will then need to cover the leaver’s share of any equity in the property (think of this as buying them out). This usually requires remortgaging the property.
What Is A Transfer Deed?
A transfer deed is a kind of legal document. Any transfer of equity requires a transfer deed that specifies how the ownership of the property is changing (owners added, removed, or gifted).
Everyone involved in the equity transfer gets to see and will need to sign the transfer deed. Because it is usually the most important part of this process, you’ll sometimes see this referred to as a TR1 form.
How Do I Complete A Transfer Of Equity?
This depends on how the ownership of your home is changing and whether a mortgage is involved. Generally speaking:
- If there is no mortgage involved – it’s simply a matter of signing the transfer deed. If the value of the transfer exceeds a certain limit (currently £40 000), you will need to pay Stamp Duty Land Tax on it.
- If there is a mortgage and someone will be added – the lender will need to approve and will want any new owner to pass credit checks and become equally liable. Most often, a lender will require a remortgage to happen.
- If there is a mortgage and someone will be removed – the lender will want to check that the remaining owners are still financially able to meet the repayments. The person removed from the mortgage will also be removed from their liability for it.
Using E A Harris Solicitors For Transfer Of Equity
A transfer of equity might not be quite as complex as buying or selling a property. However, there are still a number of complex legal targets to hit – and large sums of money are still involved.
That’s why it’s so important to get legal advice from a solicitor you trust before you do anything. It’s also a legal requirement that any new owner being added to a deed has legal representation (you can save money by only using this one solicitor if everything is completely amicable).
Why not speak to the solicitors local people in Shotton, Connah’s Quay, Queensferry, Ewloe, Hawarden and Buckley have used to transfer equity in property for over a hundred years?