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With the rising cost of living, it is easy to see how financial difficulty can occur, especially as your home is at risk if you do not keep up mortgage repayments.
According to a report in November 2023 by ONS, “49% of adults said their overall cost of living had increased compared with a month ago”. So, what sort of help is available for those who are struggling?
There are a number of circumstances in which you may wish to transfer equity in a property and here we look at when they might arise as well as any tax considerations which may apply in certain circumstances.
The phrase refers to the removal of or the addition of an individual’s name to the title deeds of a property. This may create a co-owner or remove such a person or transfer ownership completely.
Some homeowners may decide to gift a property to their children before they die, and in these circumstances, this would be treated as a transfer of equity. There may be tax consequences and so it is always important to seek legal advice.
If a relationship breaks down, assets will need to be divided and if property is involved, it will almost invariably be the largest asset. Conversely, if a new relationship is entered into by a homeowner, they may wish to put their new partner’s name on the title deeds.
Finally, the property may initially have been owned by friends or family members who bought it together. In these circumstances, individuals often move on and have to be bought out of the arrangement. Family members may also be on the same title deeds and the time may have come for a single individual to take the place of the original owners.
You will find plenty of information on equity transfer online, especially at legal specialists such as Sam Conveyancing.
Before you consider transferring equity, it is important to understand what the term means. Equity can be defined as the percentage of the property which belongs to you. This is the value of the property less any outstanding mortgage. The amount left is the equity which remains in the property. It is vital, therefore, to begin with an accurate valuation of the property.
If one person is giving up ownership and has contributed equally to the mortgage, they will be initially entitled to an equal percentage of the equity remaining in the property. The mortgage lender’s permission will be required before any transfer can be made.
If you want to transfer property into joint names with a new partner, the issue of Stamp Duty can arise, even though superficially no money is changing hands. The presence of the mortgage dictates this since consideration is involved with the new co-owner taking on responsibility for part of the debt.
If, for example, a homeowner has a property worth £900,000 and a mortgage of £700,000, when they transfer half the equity to a partner, the latter takes on responsibility for £350,000 of the debt. This is a chargeable consideration and could attract Stamp Duty inline with the current band rates.
Where a mortgage applies to the property, the lender will have to be informed and they will decide whether a transfer is appropriate. This inevitably can be quite time consuming but if there is no mortgage, the process can be completed quickly and the forms sent to the Land Registry.
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