How to transfer equity in a property with a mortgage
Transferring ownership in a property is known as ‘transferring equity’. The process can be straightforward, but if there's a mortgage on the property, or you intend to remortgage at the same time, you will need your lender's consent. Your lender will also require you to instruct a conveyancing solicitor.
Here’s what you need to know about transferring equity in a property with a mortgage:
Why might I transfer equity in a property?
A 'transfer of equity' is when an existing owner of a property adds or removes one or more people to the title (ownership) of the property.
You might, for example, decide to transfer equity if you want to:
- Add a new spouse, civil partner or unmarried partner to the deeds of your home
- Gift a property (or share in a property) to a child, spouse, civil partner or other family member
- Buy out an ex-partner after a separation
- Buy out a joint owner
- Sell your share in a property
How does the transfer of equity process work?
When transferring equity, you or your solicitor must:
- Review the property’s title documents
- Prepare transfer deed and other legal documents
- Obtain the appropriate consents from the mortgage lender, landlords etc.
- Register the Deed of Transfer (TR1 or TP1 Forms) at HM Land Registry (HMLR)
- Complete the Stamp Duty Land Tax (SDLT) return form. (even if there is no SDLT payable).
Do I need to tell my lender if transferring equity in my home?
If there is an existing mortgage in place, but you intend to pay it off before the equity is transferred, there is no need to tell your mortgage lender.
If you intend to keep your mortgage after the transfer of equity, you will need to tell your lender and obtain their consent before the transfer can complete.
Obtaining consent from your lender
Any change in the ownership of a mortgaged property will require the consent of the mortgage lender.
The lender will need to satisfy themselves that the new joint-owner can afford to pay their share of the mortgage.
The lender will also want to look into the proposed new ownership structure and set out any conditions for the existing mortgage to stay in place.
Lending criteria varies from lender to lender, and individual lenders frequently update their lending criteria.
When do I need to notify my lender?
If you do intend to keep your existing mortgage, the sooner you inform your lender, the sooner you will obtain consent for the transfer.
Adding someone to the deeds (title) of the property
You may want to add another person to the title of your property if, for example, you get married or enter into a civil partnership.
If you want to pay off the mortgage
If you intend to pay off the existing mortgage before the date of transfer, having a mortgage won't complicate the process.
If you want to pay off the mortgage at the same time as you transfer the equity, your solicitor will obtain a redemption statement from the lender. The mortgage can then be paid off at the point of transfer.
You want to retain the mortgage
When the original mortgage was granted, the lender will have carried out various affordability and suitability checks on the owner/s.
As the ownership structure will change when the equity is transferred, the lender will need to carry out similar checks on the new owners.
The lender will need to ensure that the new owners can afford to pay the mortgage and that their lending criteria are met.
It is a good idea to contact the lender and agree on a mortgage Decision in Principle (DIP) before starting the legal process.
The lender will require you to instructor a solicitor to complete the remortgage work.
Your lender will also need legal representation. If your conveyancing solicitor is an approved member of the lender's legal panel, your solicitor will be able to act for the lender at the same time. This is usually a much quicker and cheaper option than paying for another solicitor to act for the lender.
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Buying out a joint owner or removing someone from the title of the property
You may wish to buy out the other owner/s share in the property if, for example, you are separating from a partner.
In this case, the lender will need to confirm that you are able to repay the mortgage on your own. If you don’t pass the lender’s affordability checks, you may be refused a mortgage. If you can, it would be a good idea to obtain a Mortgage Agreement in Principle before starting the legal process.
Gifting the property to a family member or child
If you want to gift a property, the mortgage will need to be paid off before the transfer of equity can complete.
What are my options if the new owner/s do not pass the lender’s eligibility checks?
Whether you will be the sole owner or are adding a new person to the deeds, it is a good idea to obtain a mortgage in principle from the lender. The lender should be able to confirm that you can afford the amount you're looking to borrow and that you meet their lending criteria.
If the lender is not prepared to offer a mortgage, you will have the following options:
- Borrow a lower amount
- Approach an alternative lender
- Seek a guarantor for the mortgage
- Pay off the mortgage in full
Will transferring my equity remove me from liability?
Yes. If you are transferring your equity to an existing co-owner or new party, you will pass your liability under the terms of the mortgage to the remaining owners of the property.
What if I want to remortgage at the same time as transferring equity?
In a transfer of equity where a property is jointly owned, and one party is leaving, the remaining party would normally buy out the leaving party.
The remaining party will may decide to remortgage the property with the existing lender or a new lender.
If you will be remortgaging at the same time as the equity transfer, there is no need to tell your existing lender, as the existing mortgage will be paid off before completion of the transfer.
Our panel conveyancing solicitors can handle the legal work for the remortgage at the same time as your transfer of equity.
Will a remortgage delay a transfer of equity?
It may. If you are remortgaging the lender will need to complete its due diligence into the property and the new owners (where applicable).
Delays can occur when lenders are backlogged with mortgage applications, and some lenders move faster than others.
It may be faster to remortgage with your existing lender than with a new lender.
Will a transfer of equity delay a remortgage?
Transferring equity in a property without an existing mortgage is usually straightforward and can be completed in 3 to 4 weeks.
A remortgage typically take 6 to 8 weeks. As the legal work on the transfer of equity can be completed in parallel with the mortgage, the transfer should not delay the remortgage process.
Transferring equity in a leasehold property
If the property is a leasehold flat, the conveyancing solicitor will need to obtain a copy of the lease and comply with the terms therein.
Your conveyancing solicitor will need to notify and obtain the consent of your landlord or freeholder.
How we can help you
Whether you are gifting a property to a child, getting married or separating, or transferring equity for any other reason, our solicitor panel can help make the process as straightforward and stress-free as possible.
If you are also planning to remortgage as part of the transfer process, the remortgage legal work can be completed at the same time as your transfer of equity.
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Chris Salmon, Director
About the author
Chris Salmon is a co-founder and Director of Quittance Legal Services. Chris has played key roles in the shaping and scaling of a number of legal services brands and is a regular commentator in the legal press.