How long does a transfer of equity take?

Equity is a big part of owning a home. It represents the share of your home that truly belongs to you.

In certain situations, like co-owning a property, you might need to go through a transfer of equity. But what exactly is a transfer of equity, and how long does it take when time is a critical factor?

What is a transfer of equity?

A transfer of equity is when you change who co-owns your home. You might do this when:

• Adding a spouse, partner or family member to the property ownership.
• Dealing with a separation or divorce, with one person keeping the house.
• Adjusting how much of the property different co-owners own.

In simple terms, it's about shifting the ownership of the property.

What does equity mean?

Equity is how much of your home belongs to you after subtracting what you owe (like a mortgage). If your house is worth £150,000, and you still owe £50,000 on your mortgage, your equity is £100,000 because that's the part of your home you truly own.

How long does a transfer of equity take?

Typically, a transfer of equity is relatively quick, taking around 2 to 4 weeks from start to finish if everyone's in agreement. Delays usually stem from securing the mortgage lender's consent, however, it's worth noting that the final registration with the Land Registry may also add additional time.

What if you have an existing mortgage?

When you're dealing with mortgage lenders, things get a bit more complex when transferring equity. Here's what you need to know.

• Lender's consent: If you or someone else is joining or leaving the property's ownership, you must get permission from your mortgage lender. This is because a mortgage is like a money-borrowing agreement, and the lender needs to ensure the new person can handle repayments.
• Responsibility: If you add someone to the property title, they become responsible for the mortgage. If someone leaves, they're still responsible for their portion of mortgage debt.

Your options when you have an outstanding mortgage

If you're transferring equity and have an outstanding mortgage, you have a few options:

• Pay off the mortgage.
• Get your lender's approval to transfer the share, including the mortgage, as part of a buyout.
• If you want to keep your home, get a new mortgage from a different lender. You can use the money from this new mortgage to pay off the existing one and buy out the other person's share.

In a nutshell, when there's a mortgage involved, you need to work closely with your lender to ensure everyone's on the same page.

Transfer equity process

So how does the process of transferring equity usually work? Here's a simple breakdown:

1. Initial consultation

Begin by discussing your intentions with a legal professional or solicitor who specialises in property law. They'll explain the process, requirements, and potential costs.

2. Agreement and documentation

If all parties involved agree to the transfer, you need to prepare the necessary legal documents. These documents specify the new ownership structure and financial arrangements.

3. Mortgage considerations

If there's a mortgage on the property, you should obtain written consent from your mortgage lender. This is crucial - the lender needs to ensure the new owner can meet the mortgage obligations.

4. Legal checks and due diligence

Your solicitor will conduct various legal checks, including searches at the Land Registry, to ensure there are no legal obstacles or disputes related to the property.

5. Stamp Duty Land Tax (SDLT) and Capital Gains

If any money or other assets are changing hands as part of the transfer, you may need to pay Stamp Duty or Capital Gains Tax. Your solicitor will advise you on the applicable rates and how to pay it.

6. Finalising the transfer

Once all legal requirements are met, and the transfer deed is signed, your equity transfer is complete. The Land Registry will be updated by your solicitor to reflect the new ownership structure.

7. Post-transfer obligations

After the transfer, you need to update various records and authorities, such as the utility companies, council tax, and insurance providers, to reflect the new ownership details.

8. Ongoing responsibilities

It's important to be aware of your ongoing responsibilities as a homeowner. This includes meeting mortgage payments, home maintenance, and other obligations.

Again, the transfer of equity process can vary in duration, but it typically takes around 2 to 4 weeks for a straightforward case.

How much does a transfer of equity cost?

On average, a transfer of equity costs from £100 - £600. The transfer of equity cost is cheaper than when you originally purchased the property because the solicitor doesn’t need to make you aware of potential issues you are already aware of, like restrictive covenants.

However, the fee can be all the more costly due to a number of other factors.

What other factors affect the final cost?

• Solicitor's fees: The largest component of the cost is typically the solicitor's fees. The complexity of the transaction and the solicitor's hourly rate or fixed fee structure can impact how much you pay. Some solicitors offer competitive rates, so it's a good idea to shop around for quotes.
• Search and registration fees: Your solicitor may need to perform property searches, such as Land Registry searches, which can incur fees. Additionally, there may be fees associated with updating the Land Registry to reflect the new ownership.
• If the property is leasehold: A leasehold can affect the total cost of transferring equity because you may need to pay fees or obtain permissions from the freeholder. These additional expenses can make the equity transfer more costly compared to those who own the freehold outright.
• Disbursements: These are out-of-pocket expenses that solicitors incur on your behalf, such as obtaining official copies of title deeds, office copy entries, and other essential documents.
• If you have a mortgage: If there is a mortgage involved, you may incur additional costs related to obtaining the lender's consent, including administrative fees.
• SDLT or Capital Gains: If money or other assets are changing hands as part of the transfer, you may be liable for SDLT or Capital Gains. The amount you pay depends on the value of the consideration and the current SDLT and Capital Gains rates.
• Property value: In some cases, the value of the property can affect the cost, especially if it triggers higher SDLT liability.
• Location: The cost of legal services can vary by location, with solicitors in more expensive areas typically charging higher fees.

Do I need a solicitor for a transfer of equity?

You’re not legally required to hire a solicitor for a transfer of equity, but it's highly recommended and often considered essential. Here are some important reasons why hiring a solicitor is important:

• Independent legal advice: When you transfer equity, there's a legal process that can be better handled by a solicitor. With various legal checks, Land Registry searches, outstanding disputes obligations, you're better off with a trained professional.
• Administrative expertise: An equity transfer requires a significant amount of paperwork, which in of itself needs professional guidance. The paperwork includes considerations such as Stamp Duty Land Tax (SDLT), lender's consent to transfer, and the preparation of transfer documents.

Summary: A process lengthened by complexity

Transferring equity in your home doesn't take long - but it can be made all the longer by factors out of your control. Make sure you instruct a reliable solicitor and read over your mortgage details thoroughly to ensure the right decisions are made with your property.