Equity is the proportion/value of any property that you own outright. For example, if you have a house valued at £750,000 and the mortgage outstanding is £500,000 then the equity would be £250,000 (current value less the outstanding loan).
Many people have equity due to fact that house prices have risen considerably in the last few decades. The average price of a home in the UK in 1972 was £49,333 (adjusted for inflation), but as at April 2022 stands at £281,161. This means that many people who have been living in the same property for decades are now sitting on large amounts of equity.
What is a transfer of equity?
A transfer of equity is essentially the legal process of removing or adding someone to the ownership/title deeds of a property.
There are four key reasons for undertaking a transfer of equity.
The first main reason would be to add someone to the ownership such as a new partner/spouse or family member. This could be due to marriage/civil partnership or it could be a way of passing equity to a family member in a more tax-efficient way.
The second main reason would be to remove someone from the ownership deeds. This is commonly part of a divorce/separation.
The third reason would be to alter the percentage of the property owned by each co-owner. For example, changing a 70-30 ownership to a 50-50.
The final common reason would be where a property is co-owned and one person wanted to buy out the other(s).
If you would like to know more, or are interested in transferring equity, why not visit the website of a specialist transfer of equity solicitor such as https://www.parachutelaw.co.uk/transfer-of-equity-solicitor.
Key steps involved in a transfer of equity
The first step is to instruct a qualified solicitor to undertake the transfer. They will start by confirming who owns the property and establishing whether there are outstanding debts or mortgages secured against it.
If there is a mortgage on the property (which is quite likely), then the lender needs to grant permission for a change in ownership. Prior to agreeing to this, they will need to run credit checks on any new owners or re-run credit checks on the remaining owner(s) to make sure they can afford the mortgage payments.
The second step is to obtain a valuation of the property in order to accurately work out the value of the ownership share that you are aiming to transfer. This is particularly important in calculating the amount of any financial settlement in a divorce. The valuation will usually be carried out by an estate agent or a Chartered Surveyor.
Once your solicitor has all the information and paperwork they need, they will prepare the relevant legal documents and submit them to the Land Registry who will update their records.
How long does a transfer of equity take?
Usually, the whole process takes between 4 and 6 weeks. It will be quicker if there is no mortgage involved as there will be no reliance upon the lender to get things done. If there is a court involved in the divorce arrangements, this also may slow things down.
Are there any tax implications?
Your solicitor will be able to advise you as to any tax implications in your specific case.
How much does a transfer of equity cost?
Solicitors’ fees will vary depending on a range of factors and will include their time plus disbursements such as ID checks, Land Registry fees, and any mortgage lenders’ fees.