Transferring a mortgage: Transfer of equity

It is possible to transfer a mortgage, but it's not always easy.

Transferring a mortgage to another person requires a process known as a Transfer of Equity, which can be applied to an existing mortgage or as part of a remortgage. It’s commonly used in the following circumstances:

  • When you’re adding a partner to a mortgage, switching from a single mortgage to a joint mortgage.
  • If you’re removing a partner from a mortgage, switching from a joint mortgage to a single mortgage.
  • When you want to take a partner off a mortgage and add a new partner to the mortgage deeds.
  • If you want to transfer a mortgage to a family member.

Transferring a mortgage can be tricky

Don’t want to deal with all the trouble of handling your deed? You can consult with a lawyer who will complete the process for you.

How is a mortgage transferred?

If the transfer has been approved by your lender, or if the mortgage has already been paid off, then the process works something like this:

1. You will need to contact your solicitor to prepare a transfer deed, and if a mortgage is involved, a new mortgage deed.
2. The solicitor will then deal with the registration of the transfer at HM Land Registry.
3. If the property is leasehold, you will have to inform the landlord and will need to pay notice fees to them.
4. You will need to check with your solicitor to find out if you are liable to pay Stamp Duty.
5. You may be exempt from Stamp Duty if the transfer of property ownership is taking place as part of a divorce settlement.

Who can you transfer a mortgage to?

It’s possible for parents to add children to the mortgage and deeds using a Transfer of Equity. This can be used as part of inheritance tax planning, but it is always important to seek professional tax advice before transferring a mortgage to a family member for tax reasons.

It’s also possible to gift a property to a family member, but if there is an outstanding mortgage on the property, this will need to be repaid before the property changes ownership, or as part of the transaction.

Can a mortgage be transferred to someone with bad credit?

If you are transferring ownership of your mortgage to someone else, the mortgage lender’s eligibility checks are likely to prevent you from doing this with someone who has a bad credit score. Credit scores can be checked here.

These checks enable the lender to assess whether the proposed new owner(s) of the property will be able to continue with the same mortgage. This will include whether the new owners or joint owners:

  • Can pass a credit check.
  • Have sufficient income to be eligible for the existing mortgage.
  • Meet the appropriate age requirements.
  • Have residency in the UK.

If the new owners or joint owners do not have a sufficient income, have a poor credit history, or do not meet other requirements, it’s unlikely that they will be able to take on your existing mortgage.

If the requirements set out by the mortgage company are not met, then an alternative will be to either find some way to remortgage the property, or pay off the existing mortgage in order to transfer ownership.

Learn more about credit score here.

Are there any restrictions?

In addition to passing your lender’s eligibility checks, there are other factors that could prohibit you from transferring the ownership of the property with the existing mortgage. These include:

  • If the property is buy-to-let and one of the “new owners” intends to live in the property.
  • If a person being removed from a mortgage will still be living in the property, they will need to waive any rights to occupation.
  • Conditions vary from lender to lender, so it’s important to get in touch with them as soon as possible.

 

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