Transfer of Equity
There are several different meanings of Equity. The word Equity refers to the value of ownership one holds in a property or a business.
In regard to property, there is a term called' Home Equity'.This term i.e Home Equity refers to the difference between the unpaid balance of a mortgage, taken on a property and the current value of that property in the market.
Now,if one or more joint owners of a property, sell or transfer their share of property to the other owners we call it a Transfer of Equity.
Scenarios when Transfer of Equity occurs:
Following are a few scenarios/situations when a transfer of equity usually occurs:-
1. When a property is transfered to another member of family :
This type of Equity transfer is the most common one, where the property is transferred to some other member of the family, who would otherwise receive the property at the event of owner's death.
2. Adding Spouse name after marriage :
Another common situation of an equity transfer is where the owner adds his/her spouse's name as a joint holder in his/her share of property that has been mortgaged.
3. When a separation or a divorce occurs :
When a marriage breaks or a separation occurs, the outgoing owner is released from any mortgage commitments and the equity is transferred wholly in the name of the other owner.
4. Changing the share of allocation of the property :
Many a times, people buy a property jointly but later do not wish to own the property in a 50-50% partnership. If the property owners want to change the percentages of their ownership in a property, a Transfer of Equity is needed.
If the new property owners wish to continue the mortgage loan, they have to inform their lender(s) and take an approval for the proposed equity transfer. In such a case, the lender usually investigates the circumstances of the changed transaction. If the equity transfer is taking place as a result of separation or divorce the lender investigates the financial situation of the continuing owner to ensure that he/she alone is capable of the mortgage repayments.
The lenders specify their requirements and they also have an option of joining the transfer of equity as a party. At the same time the continuing owners have the flexibility to change their lenders for a lower interest rate or more cash. This remortgage should be done at the same time as that of the transfer of equity.
There can be a few liabilities in the above mentioned case. If there is an undervalue transfer then the lender may insist a declaration from the new owners. He could also insist upon an insurance premium(one off) being paid by the new owner.
Some people may also want to transfer property to children who are under the age of 18 years. In such a case a responsible adult holds the property until the child becomes 18 years old because legally children under 18 cannot hold property in their own name.
For the transfer of equity, one can take the advice of a solicitor/lawyer who deals with property cases. There are a number of organizations that help with all the formalities involved in a legal equity transfer process.
More articles: Equity
Well, it was very well explained and the point was made it to the point. I really appreciate your effort in this resource.