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Transfer of Equity details

How many people are involved in transfer?
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Are you remortgaging at the same time as your transfer of equity?

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Transfer Of Equity Explained

We have compiled a few notes to help you understand the basics regarding transferring ownership of your home without the need for a sale or purchase transaction otherwise known as a transfer of equity. Using the information below, you can decide whether you require a transfer of equity quote or not.

When is a transfer of equity necessary?

i. The most common situation that causes a need for the transfer of equity is when a couple split up and they have their joint names removed from the ownership to a single person's name. Sometimes this involves a exchanging of monies which is known as a "consideration" i.e. the person leaving the deeds is paid a settlement. When there is a mortgage on the property in question, the lender will have to release one of the applicants from his or her responsibilities of the mortgage whilst assuring that the remaining member is able to meet the mortgage obligations on their own. Usually if a consideration is required the funds are loaned against the property in question by either remortgaging, or applying for a second mortgage on the property.

ii. Another situation where it is commonly necessary for a transfer of equity to be executed is in the avoidance of Inheritance tax. Parents sometime transfer ownership by way of gift to the children to minimise the liabilities of inheritance tax. Inheritance tax is a staggering 40% which means you could loose a substantial chunk of estate, if the necessary measures are not put into place early regarding this. Inheritance Tax is big business to the government and the government raises over £3 billion pounds a year in Inheritance tax alone.

Basics Of Transfer of Equity

Essentially the Transfer of Equity is very simple in that it involves the execution of a simple document known as the Transfer Deed(TR1). This deed is prepared by the solicitor and needs signing by all members of the mortgage owners and witnessed independently for each member also. The signature on the Transfer deed is for the release of all liability in relation to the property for the person being removed from the Title Deeds. Necessary papers will be draw up by the mortgage lender, if there is one, for the new loan agreement for the property and there may be a consideration to be paid to the applicant that is giving up ownership. The funds as previously explained are usually obtained by remortgaging the property and releasing equity from the property itself or from taking a second mortgage against the property.

When the Transfer Deed is completed in full by both members and has been witnessed correctly, the formalities of the Transfer of Equity are complete. If there is a joint mortgage on the property, then the mortgage lender will provide the necessary documentation to relive the applicant leaving ownership of property of any liability relating to the property itself. When this documentation and the Transfer Deed are completed then the process of "transfer of equity" is completed.

Post completion of Transfer of Equity

After completion of Transfer of Equity, dependent on your individual case itself there are further formalities that need completing and dealt with without the necessary intervention of the client.

i. Depending on if and how much the consideration to the other party leaving the Title Deeds, if at all, Stamp Duty may need to be paid. This is decided at the local Stamp Duty office and they confirm that amount that will be due.

ii. If Stamp Duty is required, it will need to be paid prior to the full process of the Transfer of Equity being completed. When this is completed, the documents completed during the transaction are lodged at the Land Registry to be registered in the new owners name(s). This process is a timely and can take several weeks to be updated. There is a fee for registering the new owners which will have been taken from the customers by the conveyancing solicitors prior to completion of the matter. In instances where there is a mortgage lender involved, the Mortgage lender will retain your deeds until the mortgage is paid off.

iii. Once the Transfer of Equity is completed, you should now consider that now you are the rightful owner of the property and all liability regarding the property is with you. If mortgage lenders are involved during the Transfer Of Equity, they will usually prior to completion ask for suitable evidence showing building insurance in the correct name(s) to start on completion of the matter or prior covering you as the legal owner in the event of damage to the property such as fire. The insurance documents must show the #interest# of the mortgage lender on the property insurance so in the instance of total loss, the insurance company would inform the Lender if insurance was going to be payable due to a total loss. This protects the Lender and their borrowed money against the building itself. The Lender can usually arrange this insurance for you but it is usually advisable to shop around for cheaper deals as their prices will not be very competitive.

iv. Consideration should be given to insuring your contents of your property adequately as some basic policies only cover you for the value of second hand replacements of any lost or damaged content. Most policies now cover on a #New for old# cover basis but care must be taken to make sure you are taking out adequate insurance cover for the full cost of replacing all your contents in the even of a loss or damage. Most people under estimate the value of their possessions and could loose out if cover does not reflect realistic value of contents in today's society.

If you are looking to remortgage your property whilst completing your transfer of equity, click here for your quick Remortgage conveyancing quote from only £99 plus VAT.