How to transfer equity in a property when divorcing, dissolving a civil partnership or separating.
Transferring ownership of a home to one partner or spouse is often the best solution, especially when children are involved. It may also be that a new partner is buying an ex-partner's equity.
Here's what you need to know about transferring equity in a property after a divorce or separation.
What is a transfer of 'equity'?
Equity is the value of an individual's interest in their home or property.
Transferring equity is the legal process where an existing property or land owner adds or removes one or more other people to the title deeds (ownership) of the property.
When is the best time to transfer equity when divorcing or legally separating?
The best time to transfer equity will often depend on your individual circumstances.
You may, for example be in a hurry to complete the transfer. Perhaps one partner needs the money to move on with their lives? Maybe you need to complete the transfer of equity before a mortgage offer expires?
Divorce solicitors will often advise waiting until the final Court Order has been received, as this will set out the financial agreement for divorcing and separating couples. Waiting for the final Court Order means that you won't have to transfer the equity back if the judge does not agree with the transfer.
If you do need to transfer equity before the divorce is finalised, however, reversing a transfer of equity is an option.
What if I will be staying in the property with a view to selling it in the future?
You and your partner may decide to retain joint-ownership of your home for a period after your divorce is finalised. This can give you more time to make the most suitable financial arrangements for you, your ex-partner and your family.
This type of arrangement is quite common, and it can be formalised in the Court Order with a 'charge back'.
A charge back allows the property to be transferred to the remaining spouse and the leaving spouse will have a charge registered on the title at HM Land Registry (HMLR) which protects their interest in the property.
Can't I just pay the mortgage myself rather than change the deeds?
Changing the title deeds can involve a lot of legal paperwork. Sometimes couples informally agree that one partner will take on the other’s share of the mortgage, with a view to ‘working it out later’ - when the property is sold.
This informal approach can cause problems. If your ex-partner is still named on the property's title, they will continue to own a share of it, even if you have been paying the mortgage on your own.
Even if your ex-partner says they don't want to retain their interest in the house at the point of separation, it can be very difficult to predict future circumstances. The ex-partner will retain their legal interest in the property, so if your relationship becomes acrimonious, you could face a costly and complicated legal battle.
What are the key steps?
The transfer of equity process can be a relatively simple process. When a relationship breaks down, however, there are a few additional points to be aware of.
The process is as follows:
Speak to your lender
If you will be paying off any outstanding mortgage before you remove your ex-partner from the title of the property, you are under no obligation to tell your mortgage lender.
If you are going to keep your existing mortgage once the transfer of equity has completed, you will first need to obtain your lender's consent.
Your existing or new lender will need to be satisfied that you (or you and your new partner) will be able to pay the mortgage.
It would be prudent to get a Decision in Principle (DIP) from the lender will confirm they are happy with the proposed change in ownership.
See also:
How to transfer equity in a property with a mortgage
Instruct a conveyancing solicitor
Your solicitor will work closely with you and your spouse, partner and any other related parties to carry out the legal work for the transfer of equity.
Your solicitor will need to confirm the identity of all parties remaining on, or being added or removed from the property title deeds.
See also:
Get a transfer of equity conveyancing quote
New joint-owner funds
If a new partner or spouse is being added to the title and they are paying for the equity, the conveyancing solicitor will need to verify confirm the source of funds as part of the standard Anti Money Laundering (AML) checks.
Review the title deeds
The solicitor will obtain and review the property's title documents from HM Land Registry (HMLR).
Review the legal documents
The solicitor will complete the Deed of Transfer and other legal documents for the transfer of equity.
Sign the legal documents
The transfer legal documents will then be signed (and witnessed) by all related parties.
Transfer funds
The conveyancing solicitor will arrange for the transfer of any funds to the relevant parties, e.g. to the outgoing spouse or mortgage lender.
Complete the Stamp Duty return
Even if there is no Stamp Duty to pay, your solicitor will need to complete the Stamp Duty Land Tax return and file it with HMRC after the transfer has completed.
Register the new owner/s
The outgoing spouse or partner will be removed from the title at HM Land Registry (HMLR). If equity has been transferred to a new spouse or partner, the title will be updated accordingly.
Will there be any Stamp Duty (SDLT) to pay?
If you are transferring equity to the remaining spouse, there would not usually be any Stamp Duty Land Tax (SDLT) to pay
Similarly, if you receive a property (or share in a property) as part of a Court Order, agreement because you are divorcing, dissolving a civil partnership, or annulling a marriage, there is usually no Stamp Duty to pay.
If a new partner is buying the outgoing joint-owner's share, Stamp Duty would be payable at the standard rate.
