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What is Transfer of Equity

Dictionary definition of Transfer Equity:

Equity: The residual value of a business or property beyond any mortgage thereon and liability therein.

Transfer: To convey or cause to pass from one place, person, or thing to another, To make over the possession or legal title of.

When you look at it that way it can seem quite confusing.

Equity is simply the real value of your property to you. First they look what the value of your property is… I.E £250,000 and then they look at how much is left on your property mortgage I.E £150,000. If this were the case then your equity would be £100,000.

Transfer is simply when the ownership of this equity is changed. This is usually when a property is joint owned by 2 people and this partnership is split up. One of the partners leaves the property and transfers any interest that they may have in the property to the partner that stays in the house. The most common occurrence for this is divorce.

It is also the same scenario if 2 friends or co-habitees decide to live separately and would be dealt with in the same way.
This is usually dealt with by instructing a solicitor to use a method called “a fixed fee conveyance” to deal with the transaction. This ensures that any liabilities are known in advance.
This scenario can become more complicated if there is a dispute in the financial proceedings following a divorce (divorce mortgage) and may require a court order to give a fair compromise to both parties involved.
If there is just a mortgage on the property and there is no equity then this is dealt with by a mortgage lender who will help the partner that is to continue living in the house decide whether that can manage the repayments fully on their own. The company will then make the decision on whether they will lend the person the money.

This method can also be used if there is equity on the house. As the existing partner simply borrows more than the mortgage and pays off the equity of the property to the partner that has left.
All of this can be a complicated and confusing time and it is important that you seek the sensible advice to make sure both parties receive a fair compromise. There are many experts in this field that can give you help, support and advice. It is important to remember that you are not the only person that is going through this and whilst it may seem over whelming to you, these people will deal with the same scenario every day and therefore are the best people to give you the practical help and support that you need. Get a quote for transfer of equity here


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