Ashfords Solicitors - Transfer of Equity and Remortgage

Transfer of Equity and Remortgage

Introduction

A transfer of equity means a change in the legal ownership of a property without necessarily the sale of the property itself. The equity refers to the value of the property after repayment of any loan.

Transfers of Equity often take place where two people decide to live together (co-habit) and live in a home already belonging to one of the couple. Or on marriage, a transfer of equity would be necessary to put the new husband's or wife's name on the deeds. Sometimes transfers of equity are for other reasons, possibly tax planning.

If the property was subject to a mortgage which is intended to continue after the transfer of equity, it will be necessary to obtain the permission of the lender who may not be willing to continue funding the loan, unless the person to whom the property is being transferred has sufficient income to pay the mortgage instalments. If that person has insufficient income, the Lender may insist that the other former joint owner also remains liable on the mortgage after the transfer of the equity. Alternatively, some borrowers may use this opportunity to arrange a new mortgage with a different lender. This process can be combined with the transfer of equity and is known as transfer and remortgage.

Unfortunately if the property was purchased only recently by using a large percentage mortgage there may be no equity of value to transfer which means the outgoing owner will not receive any payment but may be released from his mortgage liabilities with the lender.