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.