You may have bought a property jointly with another co-owner and when circumstances change, you 
may want to sell your interest in the property or buy out the co-owners share. This type of transaction is known as a Transfer of Equity.
A common scenario may be where a property is originally purchased with a family member. For instance, brother A and brother B may own a property which they purchased with a mortgage and which they hold as tenants in common in equal shares.
Brother A may want to buy out Brother B’s share in the property at full market value and transfer the existing mortgage held in joint names, into his sole name.
The brothers would first need to agree the market value of the property. Brother A would then need to approach the existing mortgage lender and ensure that the mortgage can be transferred into his sole name. The existing mortgage lender would then issue Transfer of Equity mortgage instructions.
As Brother A will be paying consideration to brother B on completion, Brother B may need to appoint his own solicitor.
Example:-
The Market Value of the property is agreed at £600,000.00 and the existing mortgage is £300,000.00. Brother A agrees to pay £150,000.00 to brother B for his share on the basis that the existing mortgage will be transferred into brother A’s sole name on completion of the transaction.
Is Stamp duty Payable?
Yes. Brother A should be aware that stamp duty will be payable on completion of this transaction based not only the amount he will pay Brother B on completion, (£150,000) but also on the additional mortgage debt which he will be taking on (£150,000.00). Stamp duty will therefore be payable on the total consideration of £300,000.00 at either the standard rate or the additional buy-to-let/second home rate, depending on Brother A’s position.
Please note that if the total figures referred to in the scenario above were below the stamp duty threshold, stamp duty would not be payable.
If you have any queries regarding a specific transfer of equity transaction or any other conveyancing matter, please get in contact and a solicitor in our property department will be able to assist.
