In This Article
What is a transfer of equity mortgage?
A transfer of equity mortgage is when you take a mortgage to remove a party from the deeds of the property.
For instance, this commonly happens when a couple who owns a house is separating.
Rather than sell the house and split the proceeds, it is common for one party to remain in the home and purchase the other party’s share.
When this happens, the party selling their share has their name removed from the property deed, a transfer of equity.
This usually means removing their name from the mortgage at the same point. Once the transfer of equity has gone through, this party’s name is no longer showing as an owner of the property or the mortgage if they have been removed from it.
When a person uses a mortgage for a transfer of equity, they would either approach their current lender for permission to put the mortgage in one name only or speak with a new lender about a full remortgage and potentially raising money to pay off the other person.
Lenders need to ensure that the proposed mortgage balance is affordable in the name of the remaining party.
If it isn’t, they likely will not offer the needed finance.
There may be other options in this situation, such as adding on a relative. However, this could have implications, so professional advice should be taken.
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Can all lenders offer a transfer of equity mortgage?
Most mortgage lenders will not have a problem offering a transfer of equity mortgage as long as the rest of the mortgage application fits the mortgage lender’s criteria.
Lenders understand that people’s situations change and usually try to support applications where a party needs to be removed from the mortgage and deeds.
However, they need to ensure that they are not lending irresponsibly, so applicants will go through the same affordability assessments as they would in any other situation.
This will look at the applicant’s total income, the number of dependants, equity within the property, financial commitments such as debts and car leases, and overall credit conduct.
An experienced mortgage adviser would be able to discuss your total income and outgoings along with your situation, to be able to work out the options.
Can you get a buy to let transfer of equity mortgage?
It is possible to get a buy-to-let transfer of equity mortgage.
It is not uncommon for an owner of a buy-to-let property to want to come off the property deeds and mortgage, so a buy-to-let transfer of equity mortgage may be the solution.
For example, you may have two business partners who bought a buy-to-let property together and rented it successfully for many years.
Due to one owner’s circumstance, one may wish to give up their share in the property in exchange for a payment for the equity.
The other owner may wish to keep this property and the rental profits themself.
This would mean a transfer of equity would be taken to remove the owner selling their share from the property deeds.
In this case, the likely options would be to approach the current buy-to-let lender to find out if they’re happy to make this change to the mortgage (potentially borrowing more) or go to a new buy-to-let lender to refinance the property, potentially raising money from it to pay off the seller.
Most buy-to-let lenders are happy to do this as long as the case fits the full criteria, fitting on rental income of the property, loan to value criteria, and the applicant himself is within the new lender’s policy.
If you are thinking of doing this, you should look for a mortgage adviser with experience in buy to let mortgages that can talk you through your options.
Do I need to change lenders with a transfer of equity mortgage?
You do not always need to change lenders with a transfer of equity mortgage.
Sometimes, you can tell your current lender that you wish to remove a party from the deeds.
In this situation, the person would also be removed from the mortgage so it is no longer showing on their credit file (which means that if the mortgage were not paid, it would not affect their credit).
Your lender will be able to tell you whether you meet the affordability assessment allowing them to remove the party from the mortgage and deeds of the property.
If they feel you do not meet the criteria, they would likely not agree to allow you to do this.
This is because ensuring that your mortgage is affordable is their main priority. They need to lend responsibly rather than putting people in situations where they may experience financial difficulty.
If your lender is not able to offer you the amount that you need to keep your property (you may wish to keep your mortgage balance the same or raise money to buy off the other owner), there may still be an option to get the amount that you need from another lender.
Lenders have different affordability calculations, so the maximum amount with one lender may differ from another.
In this case, you should talk to an experienced mortgage adviser who can assess your full incomings and outgoings to determine your maximum loan amount with lenders across the market.
Most mortgage advisers will be able to give you a free consultation to work this out.
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Will we need legal advice for a transfer of equity mortgage?
To carry out the transfer of equity which involves removing a name from the deeds of the property, a solicitor or conveyancer would be needed. This is in both circumstances, whether remaining with your current lender or moving to a new one.
If staying with your current lender, your lender would need to agree on the finance side before a solicitor takes over to carry out the legal work.
Before a complete remortgage offer goes out, it will go to a solicitor that can carry out the transfer of equity legal work.
Likely, the owner selling their share will also need independent legal advice to ensure they fully understand the implications of giving up their share in the property.
The cost of the legal work for the transfer of equity would vary amongst different legal firms, but approximately £350 would be a good guide for removing a name from the deeds.
There would likely be more costs for the mortgage conveyancing and if independent legal advice is needed.
It would be best if you always asked for quotes in advance from solicitors so you know how much to expect to pay for the legal work when carrying out a transfer of equity.
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Do I need a mortgage adviser for a transfer of equity mortgage?
If you were going back to your current lender to ask them to remove a name from the mortgage and deeds of the property, you might not need an independent mortgage broker.
This may be your chosen route if you are locked into a current rate with an early redemption penalty to leave a lender.
However, it is usually prudent to talk to an independent mortgage adviser who could consider staying with your current lender versus moving to a new one.
If you plan to stay with your current lender, an independent mortgage advisor may not be able to assist with the application as your lender may insist that they deal with you directly.
If you are, however, moving to a new lender, a mortgage adviser would be able to give you the advice and apply on your behalf.
Taking professional mortgage advice is always recommended when taking out a new mortgage.
It is certainly possible to get a transfer of equity mortgage, and there may be many reasons to need one.
This may be for married couples divorcing, parents coming off the deeds of their children’s properties, friends that have bought together and wish to go their separate ways, business partners wanting to give up their equity and more.
Taking a transfer of equity may mean going back to your current lender and asking them to remove a party from the mortgage.
If they do not do this, you could get a better deal elsewhere and go to a new lender for a new contract may be the chosen route.
In this situation, you should look for a qualified mortgage adviser who can give you the independent mortgage advice you need to make a decision.
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