There are to be multiple times during an individual’s life that they could look to transfer equity in a property. The most common of these is when a property is sold, and this is the process that’s going to be focused on in this article, but it should be noted that a transfer of equity may take place for other reasons, such as during a divorce or as result of inheritance.
What Is a Transfer of Equity?
Equity refers to the portion of a house that is actually owned by the individual or individuals. For example, if a property is worth Ł200,000 and has a Ł150,000 mortgage, then equity would amount to the balancing Ł50,000. This value would need to be transferred where a property is sold. The position is more complicated where there is a mortgage in place, and permission will be required from third parties such as the lender in that scenario.
Almost all property ownership is recorded at the land registry, and therefore the starting point of any transfer of equity is to fully understand who currently owns the property and to ensure that it aligns with what everyone believes it to be and to make any corrections if necessary. This information is available at the Land Registry.
What Is the Process for Transfer of Equity?
Once the decision to transfer equity is made, it is wise to obtain advice from a trusted solicitor such as SAM Conveyancing. A good solicitor will be clear when explaining the process and costs associated – for example, https://www.samconveyancing.co.uk/news/conveyancing/transfer-of-equity-process-3894.
Where a mortgage is involved either in the current property or as part of the transfer, the first process is to discuss this with the lender to ensure that the new mortgage will be available or to gain their permission to transfer the existing mortgage on to the new property. The solicitor engaged to undertake the transaction will look at the mortgage offer, get any searches required from the local authority and get documents ready for signing.
Identification checks are really important, with form ID1 being central to this. A solicitor will assist with this process. However, it is also important to make sure that you are prompt in providing any relevant information. There are time constraints, such as the ID1 only being valid for three months, which will have to be considered in the context of the wider transaction.
The final step is to ensure that the transfer is registered accurately, bearing in mind that a new mortgage could take up to six months to show on the registry. Getting the timings right is critical and something that requires the advice of an experienced solicitor.