What is transfer of equity?
A transfer of equity is when a property owner adds or removes parties from the title deeds. Ownership of the property changes, but at least one of the original owners remains on the title deed.
Every transfer of equity will differ in scope. Several costs should be considered when completing a transfer of equity. These range from solicitor’s fees to potential Stamp Duty.
What is involved in a transfer of equity?
When looking at transfer of equity costs, it helps to first understand what the process involves. We discuss what the equity transfer process is like in detail, but in short, it usually involves the following steps:
- First, you may need to apply for a remortgage or a new mortgage. As the property’s ownership changes, its equity changes too, and a mortgage provider will need to account for that.
- Next, you’ll need to inform a conveyancer. If someone is being removed from a title deed, separate legal representation may be required. If a new owner is being added, the parties may be represented together, depending on the circumstances.
- Once you provide your identification, the conveyancer will deal with the legal work and, if needed, confirm details with the mortgage lender.
- Your conveyancer will then arrange for the deed to be signed and for any transfer of funds between the parties. An ID1 form may also need to be signed in the presence of a conveyancer.
Conveyancing Solicitors
You’ll need a Conveyancing Solicitor to complete the legal requirements in a transfer of equity. Your conveyancer will not only process the required paperwork for you, but can also advise you on the transfer itself.
Solicitors charge different legal fees depending on a number of factors, including:
- Property value
- Whether the property is leasehold
- How many mortgages there are on the property
- Whether you need to remortgage
A Conveyancing Solicitor will likely charge between £100 and £500 plus VAT for a transfer of equity. Comparing prices is always a good idea. Be sure to check credentials and reviews so you can find the right service at the best price.
Solicitors may also include extra charges while dealing with your transfer. These can include online ID checks at around £9 and an official copy of the Register of Title from HM Land Registry at £3. You will also have to pay a Land Registry fee to register the ownership change. This can cost between £20 and £305 depending on the value of your property.
Mortgage Lenders
If you have a mortgage on your property, you may have to pay your mortgage lender additional charges. Lenders often charge a “change of parties” fee at the end of a transfer of equity. This covers the administrative cost of adding or removing someone from an existing mortgage.
Some lenders require a regulated local authority search before the transfer can go ahead. This is to confirm the condition of the property. It often happens if you are taking out a new mortgage with a different lender. The cost usually ranges from £60 to £300 depending on the size of the property.
Sometimes lenders will not require a local authority search. If they are satisfied that the property is in good condition, they may instead ask you to take out local authority search indemnity insurance. This protects them if issues later arise relating to the property.
If you are becoming the sole owner of your property, you will also need to meet your lender’s mortgage requirements. This usually means the lender will assess whether you can continue making the mortgage payments on your own. You may not be offered the same rate, and there may be further costs involved.
What are the tax implications of an equity transfer?
The taxes involved in a transfer of equity depend on the details of your individual circumstances. Spouses or civil partners do not usually have to pay Capital Gains Tax (CGT) when transferring equity between themselves. If the transfer is made to children or someone else, CGT may apply.
In some cases, transferring property into the name of a spouse or civil partner, or giving them a share in the property, may help reduce tax exposure. This may also be treated as a potentially exempt transfer for inheritance tax purposes. Any liability can reduce over a seven-year period if the value involved exceeds the relevant threshold. Because tax rules can be complex, it is sensible to get legal or tax advice before proceeding.
Stamp Duty when transferring equity
The largest cost you may face in a transfer of equity is Stamp Duty Land Tax (SDLT). During a transfer of equity, you may take on a percentage of the equity in a property, and you may also take on responsibility for part of any mortgage.
You may have to pay Stamp Duty if the share of equity and mortgage you are taking on is worth more than £250,000 in total. The amount of Stamp Duty you pay depends on the price band the transaction falls into.
Different rates apply in Scotland, Wales and Northern Ireland.
The current price bands referred to here are:
- Up to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
For example, a property may have equity of £600,000 and a mortgage of £200,000. If you take on 50% of the equity and 50% of the mortgage, this totals £400,000. The Stamp Duty would be calculated like this:
- 0% on the first £250,000 = £0
- 5% on the remaining £150,000 = £7,500
The amount of Stamp Duty can also change depending on your wider circumstances, such as whether the property will be a second home. You only pay Stamp Duty if you are taking on equity and/or mortgage liability. If you are the person being removed from the title deeds, you do not have to pay.
For an estimate, you can use an online Stamp Duty calculator.
Divorce or Separation
If you are dividing a jointly owned property following divorce, either by agreement or under a court order, you will not usually have to pay Stamp Duty. This is on the basis that both you and your ex-spouse were already named on the title deeds and the mortgage.
However, if you are divorcing, you may also be dealing with a wider financial dispute. In that case, the house may be only one part of the overall financial settlement. Although you may not have to pay Stamp Duty in this situation, there may still be other legal and financial costs to consider.
See your solicitor for further advice if this affects you. You can also read our articles on financial settlements and divorce for more guidance.
Cost of transfer of equity FAQs
Do both parties need a solicitor for transfer of equity?
Although it is not compulsory, it is strongly recommended that both parties instruct a solicitor during a transfer of equity.
Is Stamp Duty payable on transfer of equity?
Yes, you may have to pay Stamp Duty if you are taking on a share of the property and/or the mortgage, and the amount is above the applicable threshold.
How long does transfer of equity take?
The time it takes depends on the complexity of the matter, but it usually takes around 3 to 6 weeks.
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