Transfer of Equity – What You Need to Know

What is a Transfer of Equity?

Equity is the legal phrase used in the context of property transactions regarding how much of your property you own. Most people take out mortgages to purchase a property, and your equity is the property’s value minus the mortgage amount. As property values move with the market and mortgages are paid off, the amount of equity you have can change depending on these variables.

A transfer of equity is the process of adding or removing owners from the property deeds. Many people find themselves needing to transfer equity for a number of personal or financial reasons. As it is a legal process, a specialist solicitor experienced in the transfer of equity is typically required to ensure the process goes smoothly.

A key feature of a transfer of equity is that at least one original owner must remain on the property title deeds. This means ownership is being adjusted rather than fully transferred. The transfer can be partial, where a new owner is added, or full, where an existing owner is removed. If an owner is buying out another owner’s share of the property, such as is often the case in a divorce, the process may include the exchange of money depending on the circumstances and if there is a mortgage remaining.

If there is an existing mortgage, mortgage lender consent is usually required. This is because the lender will need to assess the financial situation of any new owner or confirm that the remaining owner can afford the mortgage on their own if someone is being removed.

At AFG Law, our residential property team has many years of experience assisting clients with a transfer of equity. We provide clear, practical advice to guide you through the process, ensuring that all legal requirements are met efficiently. Please get in touch with a member of our team today to find out more.

Why Would You Need a Transfer of Equity?

There are several reasons why homeowners may consider a transfer of equity. Some of the most common reasons people may want to adjust the ownership of their property without progressing with a full sale include:

Changing Ownership Due to Marriage or Divorce

When couples marry or enter into a civil partnership, they may wish to add their spouse to the property title to reflect joint ownership. Conversely, during a divorce or legal separation, one partner may decide or be forced by court order to transfer their share of the property to the other, often as part of a financial settlement. In these cases, a transfer of equity ensures that the legal ownership reflects the new circumstances.  Our family team have specialist Solicitors that can deal with financial proceedings within the context of divorce to assist with this (also known as ancillary relief proceedings).

Transferring Property Between Family Members

A transfer of equity is often used to gift property or a share of it to children or other family members. Parents may choose to add their children to the title as part of estate planning. This type of transfer may have tax implications, including Stamp Duty Land Tax (SDLT) and inheritance tax considerations, which a specialist transfer of equity solicitor can assist and advise on.

Buying Out a Joint Owner

If a property is jointly owned and one party wishes to leave, the remaining owner can buy out their share. This is common among business partners, friends who purchased a home together, or former couples who no longer wish to jointly own a property. If there is an existing mortgage on the property, the mortgage lender must approve the transfer, and the remaining owner may need to remortgage or prove they can afford the repayments on their own.

The Legal Process of Transferring Equity

The process of transferring equity involves several legal steps to ensure that ownership is accurately updated and legally binding. Though the transfer of equity process is simpler than a full property sale, there are still many legal aspects involved, in which it is recommended to instruct the help of a solicitor.

At the start of the process, your solicitor will conduct some legal checks to confirm the current ownership details of your property. These checks may include reviewing the title deeds, checking the existing mortgage details and identifying any restrictions, covenants or charges against the property.

Once all of the relevant checks are completed, your solicitors will draft the relevant documents in order to progress with the transfer of equity; this may include a Transfer Deed (TR1 form) and Deed of Covenant.

Once the Transfer Deed is signed, your solicitor will submit an AP1 form to the Land Registry to update the property title. If the transfer involves a mortgage, the lender’s charge must also be registered or updated. There is typically a small fee when updating the Land Registry. The new ownership details will be officially recorded once the application is processed.

What Happens if there is an Existing Mortgage?

If the property has an existing mortgage, the transfer of equity process can become more complex, as the mortgage lender’s consent is required before any changes to ownership can be made. The lender will need to ensure that the remaining or new owners can afford the mortgage repayments before approving the transfer of equity.

When a property is subject to a mortgage, the lender holds a legal charge over it. This means that ownership cannot be altered without their approval. Before proceeding with a transfer of equity, the lender will:

• Assess the financial position of any new owner being added to the mortgage.
• Confirm that the remaining owner(s) can continue to meet the mortgage payments if removing someone from the title.
• Determine whether any changes to the mortgage terms are needed, such as a new affordability assessment or a remortgage.

If the lender does not grant consent, the transfer cannot proceed unless the mortgage is paid off or remortgaged with a new provider.

If the property is mortgage free, the transfer of equity is much simpler, as no lender approval is required. In such cases, the legal process only involves updating the property title with HM Land Registry, and there are no mortgage related restrictions or delays.

The Role of a Solicitor in a Transfer of Equity

Instructing a solicitor to assist and advise with a transfer of equity ensures that all steps are carried out correctly and in compliance with the law. At AFG Law, our residential property team can effectively assist clients with the transfer process and help them understand the legal and financial obligations and considerations that can arise.

Our solicitors will conduct thorough checks of deeds, confirm ownership details and identify any restrictions. If you would like personalised advice on your situation, please do not hesitate to get in touch with one of our specialist transfer of equity solicitors today.

How can AFG Law assist?

AFG Law has a team of specialist residential property solicitors and conveyancers to assist clients with the transfer of equity process. If you are looking for expert advice and representation then our team are here to help you.

We can effectively assist clients throughout England and Wales, so please do not hesitate to get in touch with us today.

Contact us at 01204 377600.

Our residential property team can also assist with other areas of residential property, including selling a property, remortgaging and equity release.