Written by Rebecca Allen, a Chartered Legal Executive at Spire Solicitors LLP.
There may come a time when your circumstances change and you need to add someone to your mortgage and title deeds. This is known as a transfer of equity where the legal ownership of a property changes but at least one of the original owners remains on the title. The process is generally straightforward as the parties involved have prior knowledge of the property so there is usually no need for searches or enquiries. However there are some important things to consider other than just the mortgage repayments so it is vital to take legal advice when transferring equity.
The process: In order to start a transfer of equity, you will need to obtain an official copy of the title to the property. This will be used by your solicitor to check if there are any mortgages on the property or whether there are any restrictions that need to be complied with.
Mortgages: If there are no mortgages on the property, the existing and new owners of the property will simply need to sign the transfer deed. Your solicitor will then register this with the Land Registry. If the value of the transaction is greater than £40,000, you will need a Stamp Duty Land Tax certificate.
If there is a mortgage on the property, you will require consent from your mortgage company to transfer the ownership. If you intend to re-mortgage the property, you will need to apply for your new mortgage in joint names. Your solicitor will then complete the re-mortgage and transfer together.
How you hold the property: As part of the property transfer you will also need to decide if you own the property as joint tenants or tenants in common. If you own as joint tenants you will own the property in equal shares. If you will be putting in different amounts, or the mortgage is being paid in unequal amounts, then it is advisable to own as tenants in common.
When adding someone to the title of a property, you may wish to create a declaration of trust which will set out your agreement in writing. Whilst this may seem a little unromantic at the time, if anything does go wrong it could save a lot of money and legal battles in the future.
Stamp Duty Land Tax: This is payable on the value of the transfer known as consideration. The value is based on any amount paid by an incoming owner as well as any amount outstanding on an existing mortgage or borrowed on a new mortgage. Stamp duty rates depend on whether you own any other property and the consideration being paid. You should investigate whether any Stamp Duty Land Tax liability would be incurred from the asset.
Once you have completed the transfer of equity, it is important to consider updating your Will to ensure your asset is protected, or creating a property protection trust, to help protect your property from long term care fees in the future.
If you would like to discuss any points in this article further, please contact Spire Solicitors LLP on 01603 677077 for all your legal needs.