Transfer of Equity
What is Transfer of Equity?
A transfer of equity is simply the changing of the legal ownership of a property (lender’s consent imperative) – for instance by adding a new partner, or by removing a divorced spouse, to give two common examples.
Example 1: one legal owner transferring to two – this is known as a 1:2 transfer.
Example 2: two legal owners transferring to one – known as a 2:1 transfer.
Other multiples are possible, but these are the most common examples.
The transfer may be made subject to an existing mortgage, or associated with a remortgage of the property. In the first case, the lender must also be a party to the transfer of equity and must therefore give its consent to this before any legal work is undertaken. In the second case, any existing mortgage will be repaid prior to the transfer and there is no need for the new lender (or the existing one) to be party to the transfer of equity.
This will vary depending on the circumstances of the particular case, but in simple terms can be summarised as follows:
a)1:2 transfers – mortgage being redeemed/no mortgage
We will require details of the existing and proposed new owner(s), any existing mortgage being repaid and any new mortgage being obtained. It will also be necessary for clients to decide on the method of joint ownership they wish to adopt, since the law provides alternatives in this respect. We will advise on the options available, before drafting the transfer deed and any additional documentation required and sending this for signature.
Once everything has been signed, a completion date will be fixed – if there is to be a new mortgage in joint names, this will depend on the lender’s instructions also having been fulfilled, and the new mortgage must complete on the same day as the transfer. We will then send the documentation to the Land Registry to register the change of ownership (and new mortgage, if applicable). Our legal fees and relevant Land Registry fees are payable prior to completion in all cases.
In a very simple case, the transfer can be completed very quickly, but each case will depend on its own facts.
b)2:1 transfers – mortgage being redeemed/no mortgage
The procedure will be much the same as above, save that usually the departing owner(s) will already have left the property and we will need to correspond with them separately. We will require not only their address(es), but also full details of the reason for the change of ownership and of any money being paid to the departing owner(s). The departing owner(s) may also require independent legal advice. This can often add to the length of time taken to complete the transfer of equity.
c)1:2 cases, subject to existing mortgage
We will require details of the existing and proposed owners, and of any existing mortgage that is not to be redeemed. If a further advance is being obtained from the existing lender, this must also be declared. The lender will also send us formal written instructions, detailing their requirements.
We will prepare the necessary transfer deed and any supporting documents required, and forward these to the clients for signature. The transfer will then need to be signed by the lender and a completion date fixed, at which point the documents will be sent to the Land Registry to register the new ownership officially.
d)2:1 cases, subject to existing mortgage
The procedure is almost the same as above, save that the circumstances relating to the removal of one (or more) owner(s) from the title must be declared, and it may be necessary for the departing owner(s) to sign additional documents – this will depend on the lender’s instructions in each particular case. We can provide advice on this aspect once details of the case are known.
Again, the departing owner(s) may require independent legal advice, depending on their circumstances and the lender’s instructions, and this can add to the time taken to complete the transfer of equity.
What do I do next?
If you are considering a change in the ownership of your property, our conveyancing specialists will be happy to advise and assist. Please contact us for further information, specific to your individual circumstances.
To contact our Residential Property team, please call 01744 454433, or click here to email email@example.com >