Can You Transfer a Mortgage to a Family Member?
You can transfer a mortgage to a family member or another person by a Transfer of Equity or a traditional sale and purchase transaction, but it isn't as simple as you think. If you're looking to add a family member to your mortgage, you just need to remortgage.
You will essentially be selling your home, or at least part of its equity, to another party, and they will need to apply for their own mortgage. Alternatively, you can apply for a Joint Borrower Sole Proprietor mortgage where a family member takes on part of the mortgage and you remain on the title as a sole proprietor.
However, you must both consider how the mortgage terms affect the transfer. If your current mortgage has a fixed-rate period that hasn't expired, transferring it might involve early repayment charges. This could make the transfer less financially attractive.
For instance, if you have a 5-year fixed-rate mortgage with two years remaining, you might face hefty penalties for breaking the fixed-rate period. This could significantly increase the overall cost of the transfer, potentially making it less appealing.
Why would you want to transfer a mortgage?
Helping your child onto the property ladder:
A parent might want to help their child buy their first home by transferring a property and its mortgage.Inheritance tax planning:
Transferring a property with a mortgage charge attached to it could be used as a way to reduce inheritance tax. It's a common strategy for wealthier individuals to minimise the tax burdens on their estate.Divorce or separation:
One ex-partner might want to transfer their share of the property to the other to avoid having to sell the property. This means they'll be off the title and won't be responsible for mortgage payments anymore.Downsizing:
If you're downsizing to a smaller property, you might transfer your existing mortgage and property to a family member who can afford the payments and wants to own the family home.Care arrangements:
In some cases, transferring property and its mortgage to your child or another family member who is providing care can be a way of rewarding them.Relocation:
If a homeowner is relocating to another country but wants to keep the property within their family, they might transfer ownership and the mortgage to a family member.Avoiding Foreclosure:
If a homeowner is facing financial difficulties and risks foreclosure, transferring the mortgage to a family member could be a way to prevent the property from being repossessed.Rental income:
A husband or wife might transfer their rental income for a buy-to-let property to avoid Capital Gains Tax, an additional rate of Stamp Duty, or paying a higher rate of income tax.
You'll need a deed of assignment if you're looking to transfer shares of your property and rental income to a spouse or family member for tax purposes.
Share rental income today using a deed of assignment. Drafted by an experienced solicitor. The first draft is within 1 to 2 working days - often within hours of instruction.
We draft a lot of deeds for numerous purposes, whether you're transferring a buy-to-let property into your partner's name or protecting your interest in a property that you live in.
The deed assigns:
- Rental income on buy-to-let properties.
- Capital gains.
- Full or partial ownership of a property.
Before transferring a mortgage to a family member, you need to consider:
Affordability:
The new borrower must be able to comfortably afford the monthly mortgage payments.Creditworthiness:
The new borrower's credit history will be assessed by the lender.Legal Fees:
There are legal fees associated with transferring a mortgage.Tax Implications:
Depending on the specific circumstances, there may be tax implications such as capital gains or inheritance tax. Stamp duty might also be payable, but this depends on whether you're married or not.
My ex has moved out, what can I do?
You could be able to transfer their share of the mortgage and their equity in the property to another party - potentially a family member.
You'd do this through a Joint Borrower Sole Proprietor mortgage if you can't afford the payments alone. It's a mortgage product aimed at applicants who cannot afford a full mortgage on their own but can do so with the help of a joint applicant (in this case, it could be a friend or family member).
If you're using a Joint Borrower Sole Proprietor mortgage, the main borrower and additional borrower might need Independent Legal Advice.
Please fill in the form below if you are the only party needing Independent Legal Advice.
Fixed fee of £235 INC VAT
Please fill in the form below if you are an additional party needing Independent Legal Advice.
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How to transfer a mortgage to a family member
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1
Mortgage lender consent or new mortgage application
Before you can switch a mortgage to someone else, you need the okay from your current lender. They'll check if the new person(s) are good to go and can be equally responsible for the mortgage.
You could stick with your current lender or find a new one. A new one might mean better deals, but it'll take longer to set up. Talk to a mortgage broker to see what's best for you.
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2
Instruct a solicitor
A solicitor or conveyancer will be legally responsible for handling the transfer paperwork and registering the new owner(s) of the property at the Land Registry. They will also need to see some proof of funds in how you're financing the transfer (mortgage, savings etc.)
It's important to note that if a party is being removed from the title deeds, they will need separate legal representation.
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3
TR1 and ID1 forms
Your solicitor will help you complete the TR1 form (used to transfer legal ownership of a property) and an ID1 form (if applicable - for the party being removed from the title).
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4
(If leasehold) inform your freeholder
If you own a leasehold, you'll need to inform your freeholder of the intention to transfer ownership and ensure that all service charges and ground rent are paid up-to-date.
Your freeholder might raise enquiries on this notice, which can take between 15 to 30 working days.
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5
Pay any applicable taxes
This is where your solicitor will help you pay any Stamp Duty Land Tax (SDLT) - if applicable.
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6
Transfer report and Land Registry updates
Your solicitor will prepare a transfer report and officially update the Land Registry to reflect the new ownership structure.
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7
Completion
The transfer is finalised and all relevant parties are notified of the ownership change.
Whether the transaction is for full market value or less, if your property has a mortgage charge on it, you'll need to follow the standard sale and purchase process.
For the party buying the property
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1
Mortgage Application
The family member taking on the property will apply for a mortgage to finance the purchase. They will need to provide their proof of income and bank statements to support the application.
The lender assesses their creditworthiness and approves or denies the application.
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2
Instruct a Solicitor
A solicitor or a conveyancer is instructed to handle the legal aspects of the purchase like conducting searches, reviewing contracts, and liaising with the seller's solicitor.
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3
RICS Home Survey
A survey is conducted by a RICS-accredited surveyor to assess the condition of the property and identify potential issues that could arise down the line.
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4
Exchange of Contracts
Once all the paperwork is complete, enquiries are satisfied, and negotiations finalised, the buyer and seller exchange contracts to legally bind the sale.
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5
Completion
The purchase is finalised and the property is officially transferred to the buyer. Your solicitor draws down the funds to pay the seller and the lender releases the funds to the seller's solicitor.
For the party selling the property
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1
Offer Acceptance
The seller accepts the buyer's offer. This can be for its current market valuation, or if a family member is buying the home, it could be sold under market value.
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2
Instruct a Solicitor
A solicitor takes on the legal work on behalf of the seller, performing checks on the title deeds, reviewing contracts, and liaising with the buyer's solicitor.
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3
Exchange of Contracts
Once all the paperwork is complete, enquiries are satisfied, and negotiations finalised, the buyer and seller exchange contracts to legally bind the sale.
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4
Completion
On the completion date, the property is transferred to the buyer, and the purchase price is paid to the seller. The solicitor or conveyancer handles the transfer of funds and registration of ownership with the Land Registry.
Give us a call or send a message to request a free call back or an email from our transfer team. Whether you're adding or removing someone to or from the legal title, we'll answer your queries. We can also help if you want to assign the beneficial, not legal ownership, for income and tax purposes.
There's no obligation to instruct. We'll provide a free, fixed-fee quote for our best-value service to meet your needs. No robots, no call centres. Property challenges solved.
Pros and cons of transferring a mortgage to a family member
- Family assistance - helping your child move onto the property ladder or taking over your parent's mortgage to help downsize.
- IHT reduction - reducing the value of your estate before passing away (as long as you don't pass away within 7 years of the transaction) could lower inheritance tax payments.
- By transferring property during your lifetime, you can bypass the probate process, which can be time-consuming and costly.
- It can be costly and time-consuming to instruct a solicitor to handle the transfer. You might also incur early exit fees from the original mortgage lender.
- If you co-sign or act as a guarantor on the new mortgage, and the borrower defaults on the mortgage, it could negatively impact your credit score.
- You will lose equity in your home if you transfer part of its ownership to a family member.
- Financial disputes, such as missed payments or disagreements over the property's future, can strain family relationships.
How much does it cost to transfer a mortgage?
While the specific costs can vary depending on individual circumstances, here's a breakdown of the potential expenses associated with transferring a mortgage:
Fee | Description | Cost (Estimated) |
|---|---|---|
Fee Solicitor Fees | Description The legal fees for your solicitor to handle the Transfer of Equity or sale and purchase. | Cost (Estimated) SAM's conveyancing fees start at £413 for a Transfer of Equity with a remortgage. |
Fee Removing a restriction | Description | Cost (Estimated) Our fees start at £99 for a restriction removal review. |
Fee Land Registry Fees | Description Fees for registering the new ownership of the property with the Land Registry. | Cost (Estimated) £20-£140 |
Fee Stamp Duty Land Tax (SDLT) | Description Tax payable on the value of the equity transferred. | Cost (Estimated) The outcome varies depending on the property's value, whether one party owns a second home, or if they are based overseas, as well as the amount of equity transferred. |
Fee Early Exit Fees | Description Fees are charged by your current mortgage lender for repaying the mortgage early. | Cost (Estimated) Varies depending on your mortgage lender and the terms of your mortgage agreement. |
You may also incur additional costs, such as survey fees or removal costs, depending on the nature of your transfer.
| Property Price | Standard Rate of Stamp Duty | Additional Home Rate (updated post Oct 2024 budget) | Non UK Resident Rate |
| £0 - £125,000 | 0% | 5% | 2% |
| £125,001 - £250,000 | 0% | 5% | 2% |
| £250,001 - £925,000 | 5% | 10% | 2% |
| £925,001 - £1.5 million | 10% | 15% | 2% |
| Over £1.5 million | 12% | 17% | 2% |
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