Transfer of equity explained: adding or removing an owner

What a transfer of equity is

A transfer of equity changes who owns a property without selling it on the open market. You might add someone to the title (the official record of ownership at HM Land Registry), remove someone, or change the shares in which you own it. Equity simply means the value of the property after any mortgage is paid off.

Common reasons include:

• Adding a spouse or partner after marrying or moving in together
• Removing a former partner after separating, often with one buying the other out
• Giving a share to an adult child or other family member
• Changing how a couple own their home, on tax or inheritance advice

The conveyancer prepares the documents, deals with the lender, works out any tax and registers the change. Your part is to agree the terms with everyone involved, get financial or tax advice where needed and supply documents promptly. This guide describes England and Wales; Northern Ireland has its own system.

Getting the lender's consent

If there is a mortgage, the lender must agree to the change. When someone joins, the lender will usually want them to become a borrower and will check that the mortgage is still affordable. When someone leaves, they remain liable for the mortgage until the lender releases them, which it will only do if the remaining owner can afford the payments alone.

For example, if Alex is buying out Chris's half share and keeping the mortgage alone, the lender will check that Alex's income supports the whole loan before agreeing to release Chris.

Some lenders use a simple consent form, while others need a new application or a remortgage. Speak to your lender or broker before instructing a conveyancer, because the transfer cannot go ahead without consent. If there is no mortgage, no lender consent is needed.

The TR1 and how you will own the property

The main document is usually HM Land Registry's form TR1, a transfer deed normally signed by everyone involved, with each signature witnessed. The lender may have its own documents to sign at the same time.

If there will be more than one owner, decide how you will hold the property. As joint tenants, you own the whole property together, and if one of you dies the survivor automatically owns it all. As tenants in common, each of you owns a share, such as 60% and 40%, which passes under your will. A declaration of trust can record unequal shares and what happens if you sell or split up.

Identity checks for everyone

Everyone whose name is being added or removed will need their identity checked, even if only one person instructs the conveyancer. This protects against property fraud, and HM Land Registry requires evidence of identity for anyone who is not represented by a conveyancer.

If money is changing hands, for example to buy out a former partner's share, the conveyancer must also check where it comes from, such as savings, a gift or new borrowing. Have bank statements ready, and expect anyone gifting money to be checked too.

Stamp Duty Land Tax on a transfer of equity

Stamp Duty Land Tax (SDLT) can be due even though nothing is sold on the open market. It is charged on the chargeable consideration: any money paid for the share plus the share of the mortgage that the new owner takes on. The value of the property itself does not matter here. HM Revenue and Customs (HMRC) explains the rules in its guidance on transferring ownership.

For example, Sam owns a house in England with a £300,000 mortgage and transfers a half share to partner Jo, who becomes jointly responsible for the mortgage but pays no cash. Jo's chargeable consideration is half the mortgage, £150,000. At the standard residential rates (0% up to £125,000 and 2% from £125,001 to £250,000), the SDLT is 2% of £25,000, which is £500.

Higher rates may apply if the person joining owns another home. If Sam and Jo are not married or civil partners and Jo owns a flat elsewhere, the rates could be 5 percentage points higher on each band, making the SDLT £8,000. The higher rates do not usually apply between a married couple or civil partners who live together, and a gift of a share with no mortgage involved usually has no SDLT. A return may be needed even when no tax is due, and in Wales, Land Transaction Tax applies instead.

Separation and divorce

When a property is transferred between spouses or civil partners under a court order, or an agreement made because of divorce, dissolution, annulment or legal separation, there is no SDLT to pay and HMRC does not need to be told, even if the person keeping the home takes on the mortgage. Unmarried couples who separate do not get this relief, so the normal rules apply to any money paid and mortgage taken on.

Separation usually involves a family lawyer and often a financial order, and the transfer must follow what the order or agreement says. The conveyancer will need a copy, and the lender still has to agree to release the person leaving.

Registration at HM Land Registry

Once the documents are signed and any new mortgage has completed, the conveyancer applies to HM Land Registry with the TR1, any mortgage, evidence of identity and the fee. When the application is processed, the title shows the new owners, and a restriction (a note limiting future dealings) is added if you hold as tenants in common.

The legal change is not complete until it is registered, so the conveyancer will follow the application through. Keep the signed TR1, any declaration of trust and the updated title with your important papers.

When independent legal advice is needed

A conveyancer cannot act for two people whose interests conflict, except in limited cases where everyone gives informed consent. In a transfer of equity they often do conflict: the person giving up a share may be giving away a valuable asset, while the person joining may be taking on a large debt. One or more of you may then need separate, independent legal advice, and lenders sometimes require it.

Take advice too if you are gifting a share to a child or are unsure about tax. A gift can have Capital Gains Tax or Inheritance Tax consequences, which are questions for an accountant or tax adviser rather than the conveyancer.

Checklist before you start

Before you instruct a conveyancer:

• Agree who will own what, and whether as joint tenants or tenants in common
• Speak to your lender or broker about consent, affordability and any new borrowing
• Gather photo ID and proof of address for everyone involved
• Have evidence of where any money is coming from
• Ask for an SDLT estimate, especially if anyone joining owns another home
• If you are separating, have a copy of the court order or signed agreement
• Consider independent legal and tax advice, particularly for a gift

Next steps

Get an instant, itemised transfer of equity quote, or a leasehold transfer of equity quote for a flat. If you are remortgaging at the same time, mention it so that the quote covers both. You can estimate SDLT on the chargeable consideration with our stamp duty calculator.