In our recent podcast episode ‘Borrower Not on Title’, we discuss situations that need to be considered if the borrower is not on a property title. We cover joint borrowing applications, Equity Release, indemnity policies, and other considerations, such as unequal sharers loans and cost consideration.

Joint Borrowing Applications

When applying for joint borrowing, it is important that both names are registered owners of the property. The lender will require that those named on the mortgage offer reflect those named as registered owners of the property title. If the property in question is held in the sole name of one client, then the property would need to be transferred into joint names for the application to proceed. This can be done either prior to completion or on completion of the Equity Release.

Joint Names and Equity Release

When applying for joint names, this is something we can deal with alongside Equity Release. If a situation occurs where the person who is already registered on the property doesn’t want to transfer into joint names, then unfortunately the Equity Release would not be able to proceed in their joint names. However, if both parties are in agreement, then we can provide the necessary transfer deed and liaise with the lender’s solicitors to approve this.

What we can then do is arrange for the client to sign the transfer deed alongside the Equity Release documents at the usual solicitor’s appointment. Once we have received these signed documents, we can then liaise with the lenders solicitors to satisfy any other requirements the lender might have in relation to the transfer, and arrange for the transfer to complete at the same time as the Equity Release.

While this transaction can be done together, it is important to note that an additional fee will be charged. Acting for the clients in transferring the property involves additional work to that quoted in our Equity Release conveyancing fee. What we will do is provide the client with an estimated bill, including this fee, as early as possible in the transaction.

Indemnity Policies

In some cases, the lender might have additional requirements in relation to the transfer. This can vary depending on individual case circumstances. That being said, in our experience most lenders will require an indemnity policy to be purchased by the clients on completion of the Equity Release where a property is being transferred into joint names at an under value.

This is when the party being transferred to the property title is not paying the party full market value for the share they are receiving. The reason most lenders require an indemnity policy in these circumstances is because, should the client who is the sole registered owner be declared bankrupt in the future, there is a risk that the transfer into joint names could potentially be reversed. This could then threaten the lenders security over the property.

The cost of indemnity policies is linked to the property value. However this would not typically cost more than a few hundred pounds and can be taken out of the client’s Equity Release funds on completion. It is also a one off cost, so the client would not have to pay for this policy on a recurring basis.

Can Extra Requirements be Avoided?

So, can extra requirements like Indemnity Policies be avoided if the property is transferred into joint names prior to completion? In short, yes. However, this doesn’t necessarily make the process more time efficient.

Firstly, the transfer will need to be sent to the land registry to register the clients as joint proprietors on the property title. The lender will not complete the Equity Release until they have received a copy for the property title showing it is registered in their joint names. Registration with the land registry, particularly if the property is unregistered, can take in excess of 5 months in some cases. The Equity Release would unfortunately be delayed for this time. Whilst we can request that the land registry prioritise the registration we cannot guarantee they will agree to do so.

However, if we complete the transfer and Equity Release at the same time, this registration at land registry can be dealt with after completion and does not need to delay the transaction.

Other Considerations

Firstly, we do need to consider if there is current borrowing secured against the property title and whether it is intended to be repaid on completion of the Equity Release. This is necessary as the land registry cannot register the transfer without the consent of those lenders or creditors. In our experience, whilst it does depend on the particular creditor or lender, they do not readily consent to a transfer of the property and it can take a significant length of time just to receive a response from them on the matter.

Additionally, we also cannot guarantee that after we have received the property title into joint names, the lender won’t have any additional requirements. For example, if they are aware that a transfer at under value has taken place, they are likely to still request an indemnity policy in relation to this. If the property is unregistered, completion can be achieved faster if both transactions complete at the same time. We can, however, adapt this approach on a case by case basis to ensure completion for the clients is achieved as quickly as possible.

Can Unequal Sharers Still get Loans?

Most lenders will allow the clients to hold the property in distinct shares proving that no third parties have an interest in the property. If you would like further information on third party interests, we do have an information page on this topic.

In these cases, we can draft a declaration of trust for the clients. This confirms the specific shares they have elected to hold the property in, and any other particular provisions they want the transfer to be subject to. There is an additional fee of £250 plus VAT for this which represents the additional work involved in preparing this document.

Other Costs

Usually, where the client is being added to the property title and they are not paying for a share in the property in return, no stamp duty land tax would be payable.

However, it is worth noting that where the clients have an existing mortgage or secured lending registered as a charge on the property title, the person being transferred onto that title will usually be deemed to be taking a 50% share of a total of these secured debts. What that means is that cases where the secured debt totals to more than £250,000, stamp duty land tax may be payable by the clients on completion.

It is also worth noting that if the Equity Release funds are intended for any secured debts, so the clients are repaying debt with the funds on completion, they are taken into consideration for the property transfer. This relates to the order of the transactions on completion. It just means any secured debts need to be taken into account.

Time Frame for Equity Release Transfers

Generally, on a straight forward transfer from one party to two parties, we can usually complete these matters on a similar timescale as with an Equity Release transaction, arranging to complete them both at the same time. We do however endeavour to keep the client fully informed of anticipated timescales as this helps to manage the client’s expectations and maintain a good relationship throughout the transaction.

Timescales can also be improved if you or the client is able to provide the following information at the beginning of the transaction. Firstly, confirmation of whether a transfer into joint names is required prior to instructing us. Secondly confirmation if there will be any payments to the sole owner in consideration for the transfer into joint names. Thirdly, if the property is unregistered we will need the original title deeds as soon as possible. In relation to this point, further information on unregistered land can be found on our information page.

Key Points

• We can transfer simultaneously to the Equity Release
• There will be some additional costs and a bespoke quote will be required
• Also, it is helpful for you to provide us with as much information possible at the outset, this will avoid any significant delays.