If you plan to transfer the ownership of a property, whether you are passing it down to another family member or you are in the process of divorce, a mortgage can create problems. While it is still possible to do so, the mortgage must be paid off or the new owner will need to pass the lender’s eligibility checks.
Transferring ownership of a property with a mortgage: Eligibility
To simply add another person to the ownership and mortgage is a simple process. This is because the lender will usually look at your combined income. As long as you have a joint income that is equal or higher than your individual income with the mortgage was agreed, there should be no problems.
However, if you are transferring the entire ownership or passing on a share of a jointly owned property to the other owner, the lender’s eligibility checks could be problematic.
If the new owners or joint owners cannot meet the original income or do not meet specific requirements, they will be unlikely to keep the existing mortgage. In this case, either you or they must find a way to pay off the existing mortgage. If not, there is a good chance that you will be unable to completely transfer the property into their ownership.
Aside from passing your lender’s eligibility checks, there are other rules to factor in. These rules can vary depending on the lender, but common restrictions include:
- More than 3 borrowers on the mortgage
- If the person leaving the mortgage still plans on living in the property
It would be wise to speak with your lender as soon as you can to make yourself aware of any potential issues.
How do you transfer ownership of a property?
There are a few things you must do when transferring ownership of a property. The first is to inform HM Land Registry of the change. This is so that the new name can be added to the property title and the old name can be removed.
Depending on the circumstances, you may find that you need to pay stamp duty land tax (SDLT). This is something you should discuss with your solicitor to ensure you understand how this works.
Finally, it is important that you make yourself aware of the tax implications. When gifting property to another person, it remains part of your estate for inheritance tax purposes for 7 years. If you continue to live in the property, this could also affect your liability for inheritance tax. You may also find yourself liable for Capital Gains Tax depending on the circumstances.
Find a reliable solicitor for transfer of ownership
Betesh Middleton Law is a reputable soliciting firm in Greater Manchester. We carry plenty of experience to provide you with valuable soliciting services that will make the transfer process easier. Get in touch to find out more.