If you need to transfer the ownership of a property, such as when getting divorced or if you want to transfer the property to a family member, having a mortgage can make things more complicated. While it is perfectly possible to transfer ownership of a property with a mortgage, the mortgage will either need to be paid off or the new owner will need to pass the lender’s eligibility checks.
Lender’s eligibility checks when transferring a mortgage
If you are simply adding someone else to the ownership of the property (and therefore the mortgage) this can be relatively straightforward as it will usually be your combined income that is looked at by the lender. As long as your joint income is equal to or higher than your individual income was when the mortgage was agreed, you should still be eligible for the same mortgage.
However, if you are wholly transferring ownership (e.g. gifting your property to your children) or giving up your share of a jointly owned property to the other owner (e.g. during a divorce) then the mortgage lender’s eligibility checks could be more of an issue.
If the new owners or joint owners do not have a sufficient income to be eligible for the existing mortgage (or do not meet other requirements, such as age or residency in the UK) they will likely be unable to keep your existing mortgage. If this happens, you or they will either need to find some way to pay off the existing mortgage, or you will likely be unable to transfer the property wholly into their ownership.
Restrictions on transferring ownership of a property with a mortgage
Besides passing your lender’s eligibility checks, there are other factors that may mean you are not able to transfer a mortgage to someone else. The rules vary from lender to lender, but some common restrictions include:
- If the property is buy-to-let
- If the mortgage will have 3 or more borrowers
- If a person being removed from a mortgage will still be living in the property
It is a good idea to consult with your lender as soon as possible to ensure you are aware of any issues that could affect your ability to transfer ownership.
How transferring ownership of a property works
When transferring ownership of a property, you will need to:
Change the registered owner of the property – You will need to inform HM Land Registry of the change of ownership so the new name can be added to the property title and the old name removed, if required.
Pay Stamp Duty – Depending on the circumstances, you may be required to pay Stamp Duty Land Tax (SDLT) when transferring ownership of a property. You should consult with your solicitor to understand your liability for SDLT.
Understand the tax implications – When you gift a property to someone else, such as your children, it remains part of your estate for inheritance tax purposes for 7 years. If you remain living in the property, this can further affect your liability for inheritance tax. You may also be liable for Capital Gains Tax depending on the circumstances.
Get reliable conveyancing for transfer of ownership
Bird & Co Solicitors is a long-established law firm offering conveyancing services for properties across England and Wales from our 3 offices in the East Midlands.
We are highly experienced in conveyancing for all types of residential property transactions, including transfer of ownership. Our conveyancing solicitors can guide you through everything you need to know to ensure a smooth transaction and protect your interests. We are accredited by the Law Society’s Conveyancing Quality Scheme reflecting the high quality of our residential property services.
To find out more about our conveyancing services, call us today on 01476 591711 or use our contact page to find details of your nearest office.