A transfer of equity means a change in legal ownership of a property. It will often take place where a borrower is added to or released from a mortgage. How much SDLT you pay will depend on the circumstances of the property transfer.
Joint owners (including unmarried couples) might agree to transfer the ownership of a property they own together to just one of them. For example, an unmarried couple who are splitting up with one taking sole ownership may need to pay SDLT on the total chargeable consideration.
For example, a house is valued at £400,000 with £100,000 outstanding on the mortgage and £300,000 in equity.
The person taking ownership:
- pays the other £150,000 for the other half of the £300,000 equity in the property and
- becomes responsible for the other half of the remaining mortgage, which is £50,000 (assuming the property is owned in equal shares).
This gives a chargeable consideration of £200,000.
Where an individual has taken ownership of equity in a property which has a mortgage, Stamp Duty will usually be payable if the chargeable consideration is above the current threshold of £250,000. This changes to £125,000 from the 1st October 2021. In this case no SDLT is due however the new owner must inform HMRC by filling in an SDLT return.