Transfer of Equity

Given that a mortgage is a long-term commitment, it’s only natural and logical that life circumstances can change plans made, often several times, throughout the duration of this type of financial contract.

When would a Transfer of Equity be necessary?

One of the less frequent changes is the addition, or removal, of someone from the mortgage deeds and usually subsequently the property deeds themselves. This is known as ‘Transfer of Equity’ and can occur for a number of reasons. The most common of these reasons would be where a couple are separating or where a new partner is moving in and joining the financial responsibilities.

Sometimes, it is where siblings or friends have bought together and one of them is moving out and potentially even adding someone else at the same time. Or where a parent wants to ‘pass down’ a property to their grown-up children or grandchildren.

What if all borrowers want out of the agreement?

The important thing to remember is that to make it a Transfer of Equity, one borrower must remain on the mortgage/title deeds. If all leave, no matter who you are passing the property to, this is considered a sale and purchase legally; and the correct legal and application process must be followed. This could also bring stamp duty tax implications.

How does it work when staying with the same mortgage lender?

Assuming you are remaining with the same mortgage lender, this is a two-stage process; firstly, the lender must ensure they are happy that the new scenario fits their criteria. For example, if a couple have a £200,000 mortgage together and one partner earns £50,000 per annum and is leaving the mortgage while the remaining partner only earns £15,000 per year, the lender may not allow the Transfer of Equity as the risk has substantially increased for them; understandably, this can be difficult to take in the event of a relationship break up.

However, if a new partner is being simultaneously added who earns £50,000 or more with a good credit score, then the mortgage lender should be happy to proceed. The lender will usually charge an admin fee, typically around £200 to carry out this process.

The second stage is the legal process. A solicitor could charge around £500-£600 to carry this out. It’s the process of changing the mortgage and title deeds at the land registry and sorting out any future agreements surrounding future equity split and potential sale of the property. Again, this can be complicated as both parties must sign and agree.

What happens if you are moving to a different lender?

If you move lenders then you would need to apply for the new mortgage in the new names/name and they would assess the application on that basis; however the legal process is still required so no matter what the new lender agrees, nothing is cast in stone until the legal process is completed and both those leaving the deeds and those joining have agreed.

For bespoke advice and guidance, based on your own set of personal circumstances, we are here to help.

October 2018