The process of transferring equity can be used to achieve several different outcomes. In addition to transferring the ownership of a property to another party, this process can also be used to remove an owner from the deeds or legal title.
Reasons to transfer home equity
A transfer of equity can be beneficial in a range of different situations, including changing your tax liability by purchasing property with a co-owner and removing an ex-partner from the deeds.
Things to consider before transferring equity
It is important to consider your options and seek legal advice from a professional with experience in the transfer of equity process. Further information can be seen here: https://www.samconveyancing.co.uk/news/conveyancing/transfer-of-equity-process-3894.
– Mortgage considerations
As the equity transfer process officially changes ownership of a property, it is vital to understand how this may affect any outstanding mortgages on the property. You may need to proceed through the remortgaging process when adding or removing a co-owner and as such, contacting your lender or a mortgage advisor as soon as possible is advisable.
– Stamp Duty
When a party provides consideration for interest in a property, stamp duty becomes payable. Stamp duty may apply on transfers that will see you taking on a larger share of the mortgage and, therefore, a larger share in the value of the property.
– Valuation
If you are planning to buy out a co-owner, all parties will be required to determine the sum of money that you will pay for their share of the property. To ensure this part of the process proceeds fairly and efficiently, it is beneficial to determine the precise market value of the property. You should also review any deed of trust documentation that may be applicable to ensure that all parties are getting a fair deal.
– Capital Gains and Inheritance Tax
When transferring a share in a property to another party, you must determine how this process will impact your position in regard to capital gains tax.
Additionally, if you want to transfer your share of a property to another party and won’t be receiving a sum of money equal to the market value of that share, it is imperative to understand how this may affect your inheritance tax position.
– Joint Ownership
When adding a co-owner to the title deeds of your property, you must set out whether you will be tenants in common or joint tenants.
Joint tenants have equal claim to the entire property, which means that full ownership will be transferred to any surviving owners in the event of another owner’s death. Tenants in common have a divided claim to the property. In addition to allowing co-owners to have unequal shares, co-owners will not automatically inherit the property in the event of a death.
If you decide to own a property with a co-owner as tenants in common, you must also consider whether you will benefit from creating a declaration or deed of trust.