A transfer of equity is the process by which you can change the ownership of your property either to add a new owner or to remove a current owner from the legal title or deeds to the property.
Why might you want a transfer of equity?
You might want to reflect the new ownership of your property and therefore a transfer of equity, in the following situations;
· You own a property in your sole name and want to co-own the property with your spouse or partner
· You have separated or divorced and want to buy-out or remove your ex-partner
· You want to buy-out a co-owner of an investment property
· You want to alter your income tax or capital gains tax liability by sharing with a co-owner
What do you need to consider?
Mortgage – as the ownership of the property is changing you may need to remortgage either in your sole name if you are removing a co-owner or your joint names if you are adding an owner. We would suggest that you either contact your lender directly or speak to a mortgage advisor to determine the next steps.
Valuation – if you are buying out a co-owner or being bought out yourself, you will need to agree the amount that you will be paying or receiving in return for your share of the property. A good place to start is to find out the market value of the property and refer to any Declarations of Trust you have in place for the property.
Stamp Duty (SDLT) – Stamp duty is payable when ‘consideration’ is given for an interest in a property. Consideration can be cash but if you are taking on a greater portion of the mortgage in return for a greater share of the property then this is also consideration and there may therefore be SDLT to pay on the transfer.
Joint Ownership – if you are adding an owner to the title of the property you will need to decide whether you want to own as joint tenants or as tenants in common. If you wish to own as tenants in common, you will also need to whether you will need a Declaration of Trust.
Inheritance Tax and Capital Gains Tax – if you are transferring your share of the property to another without receiving full market value for your share you will need to consider the impact on your inheritance tax position. Likewise, you will need to consider your capital gains tax position whether or not you are paid for your share.
If you would like to discuss a transfer of equity please contact Aiden Jakubik on 01394 277 941 or at Aiden@fairstep.co.uk, alternatively fill out our contact form, and we would be happy to discuss your requirements in further detail.
Get a free online quote today.