Transfer of equity explained
This is when an owner of a property adds one or more other parties to the ownership of the legal title of their property, or if they want to remove one or people from the title. When transferring equity, it doesn’t actually have to include moving or transferring any actual money to the other party or parties.
What is a transfer of equity?
A transfer of equity is when a jointly owned property is transferred to a single one of those owners, or when a single owner adds one or more people to the actual ownership of the property. Equity is a legal term for how much of the property you own - if you are a sole owner you are a 100% owner you have 100% equity share. If there is a mortgage involved, the equity is the market value of the property less the mortgage amount. I if a property is worth £425,000 and you take off the £225,000 mortgage, then the equity is £200,000. So, when transferring equity, you are basically giving the person you are transferring the equity to a share in the equity profit of the property.
When would I need to transfer of equity?
A transfer of equity adds or removes one or more people from the legal title (or ownership) of the property. If a married couple own a property in joint names and they want to divorce, then they will either have to sell the property to be able to split any of the equity profit. Another common alternative is that the couple might make an agreement to pay one or the other an mutually agreeable amount of money to be able to keep the property. This transaction needs to go to a solicitor who will write up certain documents for the clients to sign, so when the agreed amount of money has changed hands the equity is transferred fully to the person who bought out the other partner, and they are registered as sole owner at Land Registry.
Other reasons that transfers are usually done without money changing hands could be if one of the partners has died, and the deceased persons share would need to be transferred to the surviving owner and registered accordingly with Land Registry. Or, sometimes parents may want to add children to the property as a gift, with no money changing hands.
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