Specialist conveyancing articles to inform you about conveyancing for a house or a flat; whether you already own your own home or if you are buying one. These are free to read and written by specialists in this area.

At SAM Conveyancing we give you all the information you need to know written in a way that makes it easy to understand. We also have a panel of conveyancing solicitors should you need someone to help with conveyancing for buying a home, lease extension, remortgage, transfer of equity, collective enfranchisement, independent legal advice or deed of trusts.

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Transfer of Equity

27/03/2020
A transfer of equity differs to a sale and purchase as in most cases one of the existing legal owners of the property will remain on the title and a party is either being added or removed. The timescales are quicker than when you first purchased the property although it can slow down if you can't get mortgage lender consent to the transfer or if a party being removed fails to get their ID1 Form verified. Whilst you can complete the process yourself, you will need a transfer of equity solicitor for some parts of the transaction.

In this article we'll explain the transfer of equity process, the costs involved and how to overcome problems along the way.

Transfer of Equity Solicitor

We can handle the whole process in a matter of weeks with our panel of solicitors. We can help with:

  • Transfer a party on or off the legal title
  • Separation Agreements
  • Gifted transfer for no consideration

Fixed Fee | Rated Excellent on Trustpilot | Completions in weeks not months | On all Mortgage Lender Panels


Summary of the Transfer of Equity Process

    1
    (if applicable) Get remortgage mortgage offer or mortgage lender consent
    2
    (if party being removed) Get an ID1 Form verified
    3
    (if leasehold) Confirm freeholder notice and settle any ground rent or service charges due
    4
    Completion takes place and (if applicable) money is transferred to buy the equity
    5
    Post completion work including filing SDLT form and registration at the Land Registry

Transfer of Equity Costs

Here are list of the transfer of fees and costs to factor in when completing a transfer.

  • Solicitor fees including ID checks, office copies
  • Land Registration fees
  • (if party being removed) ID1 Form verification fee
  • (if mortgage) Change of mortgage fee
  • (if leasehold) Notice fee to freeholder

On average a quote will cost in the region of £450 to £1,000 depending on which solicitor you instruct, if the property is leasehold and if there is a mortgage.

Transfer of Equity Timescales

  • Mortgage application to mortgage offer (if required) - up to 5 weeks
  • Person/s moving out completes their ID1 form/s and has these checked - up to 1 week
  • Mortgage redemption statement delivered to solicitor and signed mortgage document - 1 week
  • Final completion - 1 week

Where there is no mortgage and no money changing hands the timescales can be as quick as 2 to 3 weeks.

Frequently Asked Questions
Do you need two solicitors?
This depends on the transaction.

  • Party A is adding on Party B - one solicitor can act for both parties in updating the legal title and mortgage. Party A may wish to obtain independent legal advice on the equity they are transferring to ensure they are fully aware of the value of the equity and that they are being suitably remunerated for it. Most transfers are for under the market value which could mean that Party A is out of pocket if the relationship breaks down and the parties sell.
  • Party A is removing Party B - one solicitor can act for party A (remaining on the legal title) and can remove Party B's name and update the mortgage lender. Much like the above, party B will be advised to obtain independent legal advice on the equity they are transferring to ensure they are fully aware of the value of the equity and that they are being suitably remunerated for it. Party A would want to make sure that Party B doesn't have a future claim to the property. The parties would be best placed drawing up a Settlement Agreement to confirm what was agreed.

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Transfer of Equity Stamp Duty Land Tax Calculator

 

Money Changing Hands

What is the total Existing Debt on the property?

What percentage of the existing debt is being taken on?

Is there any other consideration given for the equity?

Existing Debt taken on

£0
£0
£0
You are responsible for paying the correct stamp duty based on your own circumstances. You should call HMRC for help with Stamp Duty Land Tax queries and to confirm your own personal liability on 0300 200 3510 Opening times: 8.30am to 5pm, Monday to Friday (closed weekends).
 
 

Do I need a statutory declaration of solvency transfer of equity?

Where a transfer is completed under market value then the mortgage lender or solicitor may require the party gifting their equity to make a Statutory Declaration of Solvency to an independent solicitor.

To be able to declare you are solvent, your assets (assets meaning valuable things you own like money in the bank, car, jewellery or houses) must outweigh your liabilities (HMRC taxes, loans, mortgages, contracts with suppliers). If you were made bankrupt within 5 years of gifting your equity then the transaction could be reversed in order for the property to be sold to pay off the creditors.

Here are some useful articles on this:


We have solicitors who can help provide legal advice on this so call us to get a quote on 0207 112 5388

Transfer of equity with existing mortgage

If you have an existing mortgage registered over the legal title then you have 2 options available to you:

  • Obtain mortgage lender consent
  • Get a new mortgage

If you can't get mortgage lender consent and the party/ies are unable to afford the mortgage in just the new owner's names then you cannot complete the transfer.

What stamp duty is payable on a transfer of equity?

You don’t pay Stamp Duty Land Tax (SDLT) if you transfer an interest in land or property to your partner as part of an agreement or court order because you’re either:

  • divorcing
  • dissolving a civil partnership
This also applies if the partners either:

  • annul their marriage
  • legally separate
In these cases there’s no need to tell HMRC about the transfer, even if the value is more than the Stamp Duty Land Tax threshold.

In all other cases, stamp duty land tax is payable on the total consideration being paid which is set out within the Finance Act 2003, Schedule 4, Stamp duty land tax: chargeable consideration. Consideration can be cash changing hands or the taking on of a debt (such as a mortgage or personal loan). To work out the total consideration you add the cash/money being paid for the share of the property being transferred and the new owner’s share of the existing mortgage/loan debt. If the total consideration exceeds the stamp duty threshold, then stamp duty is payable at the prevailing rate.

The payment (consideration) can take the form of cash, the giving of goods (giving a personal possession in exchange for the land/property), providing works or services (giving work or a service in exchange for the land or property), release from a debt, transfer of a debt, including the balance of an outstanding mortgage.

The Finance Act 2003 defines existing debt (mortgage): “existing debt", in relation to a transaction, means debt created or arising before the effective date of, and otherwise than in connection with, the transaction

For example, Jane owns a property and wants to add on her two sisters. The sisters are not paying any consideration. The existing mortgage on completion is £300,000 and no one owns a beneficial interest in any other property.

Type of consideration Amount of consideration
Consideration paid for equity

£0

Existing Debt/mortgage on completion £300,000 / 3 owners = £100,000

£100,000 x 2 new owners = £200,000

Total consideration used for stamp duty land tax calculation

£200,000



For Example, John and Mary are not married and decide to separate. They own a £350,000 house with a £250,000 mortgage. John is going to buy Mary's 50% share in the property. As John isn't married to Mary, and half the mortgage (£250,000 / 2 = £125,000) added onto the consideration of £50,000 equals £175,000, then stamp duty is payable.

Type of consideration Amount of consideration
Consideration paid for equity

£50,000

Existing Debt/mortgage on completion £250,000 / 2 owners = £125,000

£125,000 x 1 new owner = £125,000

Total consideration used for stamp duty land tax calculation

£175,000



You should call HMRC for help with Stamp Duty Land Tax queries and to confirm your own personal liability on 0300 200 3510 Opening times: 8.30am to 5pm, Monday to Friday (closed weekends).

4 Stages of the transfer of equity and remortgage process

    1
    Instruct a Solicitor
The parties remaining on the legal title instruct a solicitor to act on their behalf.

For the party leaving the property, they will need to complete an ID1 form and have this witnessed. The witnesses can only be a solicitor, licensed conveyancer, notary public, barrister, CILEx Conveyancing Practitioner, Chartered Legal Executive Conveyancing Practitioner, Chartered Legal Executive, lawyer outside the UK, officer of the UK armed forces operating overseas or an employee at a Land Registry Office.

If you are paying consideration to the leaving owner, then your solicitor will need to confirm the source of the funds you are using (read this article on How to prove source of funds).

    2
    Mortgage consent or mortgage offer
As highlighted above, getting the consent from your lender for a transfer of equity with existing mortgage if you are paying off a mortgage should be the first thing you do during the process. Without the consent from your mortgage lender your solicitor will not be able to progress your transaction.

If you are getting a new mortgage then your mortgage lender issues their mortgage offer to your solicitor. Different mortgage lenders will have different requirements for their solicitor to adhere to. Whereas some won't ask the solicitor to do anything more than their obligations under the CML, some mortgage lenders request additional information to be provided to them before they will agree for the mortgage to be issued. For example, Paragon Mortgages require the solicitor to provide copies of planning permission, building regulations and rights of way, however Santander Plc doesn't require this.

If there is an existing charge registered on the property, then the solicitor requests for the mortgage lender to provide a current mortgage statement in order to discharge the balance on completion. If there is a mortgage they will then send off the certificate of title to the mortgage lender requesting the release of the mortgage funds in time for completion.

    3
    Completion and payment of Transfer of Equity Costs
The solicitor sends you a financial statement before completion detailing the legal fees and disbursements. This is an example of a costs statement for a transfer with an existing mortgage of £200,000 and £50,000 consideration:

Cost
Description
£250,000
Mortgage advance from new lender
Less:
£200,000
Existing mortgage
£50,000
Payment for equity to leaving party
£TBC
SDLT payable at current rate
£599
Solicitor Fee INC VAT and disbursements (this varies depending on the property value, if the property is leasehold and if there is a remortgage
£40
Land Registry
£639*
Balance to complete excluding SDLT
* Leasehold financial statements would need to include a notice fee payable to the freeholder to confirm change of ownership and any new mortgage.


Once your mortgage advance is received by your solicitor and you and your solicitor are ready to complete, then your solicitor will redeem your existing mortgage, pay the consideration due to the leaving owner, settle their invoice and any disbursements (online ID check, official copy costs and OS1/bankruptcy). The balance, if any, is then repaid to you. The only amounts left will relate to the Land Registry fees and any costs due to the property being a leasehold.

    4
    Post completion
The process for discharging the old mortgage and registering the new mortgage/owners at the Land Registry can take between 1 to 6 months after completion. The time delay is linked to the Land Registry having a backlog of work. This can be extended further for leasehold properties if the freeholder/managing agent delays in releasing the notice. Delays can be worsened if your service charge and/or ground rent are in arrears so make sure that you have settled these prior to remortgaging otherwise you may have a stand-off, with your freeholder not releasing your notice until your service charge account is settled (read more about What happens after completion).

Transfer of Equity Process Diagram showing graphically people coming on an off the legal property title and what is involved

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