A transfer of equity typically takes place where a couple who jointly own a property separate, or when a couple transfer a property from one of their names into both names. As long as there is one legal owner and no more than four, as many parties can be involved in the transfer of equity as is necessary. As the name suggests, a transfer of equity is essentially a gift which involves property changing ownership without money or money’s worth being paid to the outgoing owner. This includes the transfer of equity where the individual who parts with the property (or part of the property) receives no payment.
Transfer of Ownership Process
The form used in a transfer of equity is Land Registry Form TR1, where the current owner is called the transferor and the new owner is referred to as the transferee. The first thing that will need to happen is obtaining an official copy of the title, as this will be used to check if there are any mortgages on the property, or other restriction that need to be complied with.
In cases where there is no mortgage to repay, all involved parties simply need to sign the transfer deed before registering it with the land registry. If the value of the transaction is above £40,000, then a stamp duty certificate is needed.
If you need to repay a mortgage
If there is a mortgage of the property that is to be repaid as part of the transaction, either by the incoming owner or a remortgage, it will need to be repaid on or before completion. If the mortgage is not repaid in full, the lender will not release necessary forms, and the transfer will not be able to be registered.
If the existing mortgage is remaining
If parties want the remaining mortgage to remain, the consent of the mortgage lender needs to be given before the transaction can complete. If someone is being added to the title, they will become equally liable with the other owners for the mortgage.
For parties being removed from the title, the mortgage lender again, needs to agree, as they’ll be being released from their obligations under the mortgage and the lender will want to check that the remaining parties are financially capable of maintaining mortgage payments.
Where a transfer of equity involves taking someone off the title, a solicitor can only act for one party (either the ingoing and remaining party or the outgoing party). Usually it is acceptable for only the remaining and incoming parties to be represented, but outgoing parties may also wish to instruct a solicitor.