Property transactions are often complicated and costly, requiring the services of a solicitor and the payment of mandatory fees. A transfer of equity is very different from a sale or purchase but many aspects of the process are similar.
Equity is the value in your property which exceeds the outstanding mortgage. This is a transferable asset. You might want to execute a transfer in order to give a new partner financial rights in your home, or to separate your finances in the event of a divorce. Alternatively if you have joint ownership, you might want to convert it into single ownership, or you might wish to gift your ownership to a family member.
The Process of Equity Transfer
You’ll need a conveyancing solicitor and you should obtain several quotations for this service so you know exactly how much you’ll be paying and to ensure there are no unexpected extras. Alternatively, you could use a concierge service such as that provided by Sam Conveyancing, which can provide access to a wide choice of recommended and affordable solicitors.
Your solicitor will take care of all the legal requirements, including verification of the title deeds. Provided that your mortgage lender agrees to the transfer, the process should be fairly smooth. Once your solicitor has prepared the Land Registry’s TR1 transfer of equity form, you and the other party or parties involved simply have to sign it in the presence of a witness and you can proceed to completion.
There is a fee to pay when the documentation is filed with the Land Registry and any party who is relinquishing the equity will need to complete an ID1 form to confirm their identity. The UK government website provides helpful detail on the procedure
A Breakdown of Transfer of Equity Costs
It’s impossible to be exact about costs because every case has its own variables. However, there are usually five or six fees for which you need to budget. Assuming there are no exceptional circumstances or problems with title, your solicitor’s fees will be in the region of £250-£750 plus VAT at 20%. Try to fix this amount before you begin.
Land Registry fees vary dependent on the value of the property. If the person receiving the equity is paying then the charge is based on the value of the equity only. If the entire property is being transferred, the charge is calculated on its market value less any outstanding mortgage.
If the transferee is paying to receive the equity the scale of charges begins at £20 for values up to £80,000 and increases by increments to a maximum of £500 for equity worth £1 million or more.
If the equity is a gift, then the starting points is £20 up to £100,000 equity value, increasing to £140 for a value of £1 million or more.
If there is an outstanding mortgage, the lender may ask for search indemnity insurance which will cost between £50 and £150.
If the property is leasehold, you’ll need the consent of the freeholder, which may cost you nothing or could attract a fee as high as £250.
The identity checks cost about £10 per person and charges for money transfers are likely to be in the region of £20 to £40.
The largest potential cost is stamp duty. If the equity is a gift, there is no stamp duty. In most other cases, if the transaction is worth more than £125,000, stamp duty will be payable starting at 2% and rising to 12% for transactions over £1.5 million.