Transfer of equity is the process of adding or removing someone from the title deeds of a property. Essentially, this results in changing the owner of the house or houses. It can happen for various reasons, and there are multiple versions of this transfer. The most common reasons to transfer the equity of a property include relationship changes and tax efficiency, to name but a few. 

Divorce or Separation 

If your marriage or relationship has broken down and you share ownership of a property, it might be a good idea to start the process of transferring equity. This is a discussion to have with your partner and a solicitor as there can be many complications when two people share an asset. It is possible to remain joint owners and sell the property, sharing in the profit made following the sale, However, depending on the reasons for separation, some couples prefer to remove one party’s ownership and make the other the sole owner. In cases where one partner intends to keep the home, perhaps for the sake of children, this requires a transfer of equity. 

Relationship Changes

When moving in with a new partner couples generally choose to buy a house together and split the ownership. However, if one party already owns the property, they may want to add their partner to the deed of that property. This can be a great way to minimise expenses while enjoying living together. In this scenario, the partner would be added to the title deed of the house and become a co-owner of the property.

Resolving Joint Ownership 

As it is getting more difficult to get onto the property ladder, people are choosing to purchase homes with the help of family or friends. This initial financial support helps them afford their first property but at some point down the line, the owner may wish to fully own the home. In this case, they can buy out the others or be gifted the property through the transfer of equity.

Tax Efficiency 

Transferring equity to children or family members can be an effective way to reduce inheritance tax if you intend to leave the property to them in your will. The property can be treated as a gift, minimising the tax owed when it is transferred. If you are considering this, it is worth finding legal advice beforehand. 

What is The Transfer of Equity with Mortgage?

Transferral of equity can be a relatively simple process when a property is completely owned by the parties listed on the deed. It can become more complicated when mortgages become involved. 

As a mortgage is a credit agreement, you must consider that the person leaving or joining that agreement must be either released from or accepted into that agreement. Before starting the process of transferring equity, you must receive a document with the written consent of the lender before you can proceed. 

The new owner will become liable for the mortgage and the mortgage lender will have to make sure that they meet the requirements and responsibilities of the mortgage agreement. They will have to maintain payments and keep up communication with the lender with the same frequency as that of the previous owner.

If you are wanting to resolve your mortgage before transferring equity, there are many things to consider. You could choose to pay off the remaining mortgage, otherwise known as ‘discharging’ it or you could choose to remortgage the property with a new lender. This would free up the funds to discharge the existing mortgage and create surplus funds you could use to buy out the other shares in the property if there are any. 

However you are choosing to transfer equity, and for what reasons, it is worth consulting a solicitor to determine how the process can best serve your situation.