Congratulations, you have just bought your first property and are looking forward to developing it. However, did you know that there might come a time when you need to change the legal ownership of your title? It is unfortunate that most property owners buy properties without putting this in mind until it is too late. Transfer of equity is a process where the legal ownership of property changes due to emerging circumstances. For instance, in a divorce process, one party might seek to remove their ex from the title. On the other hand, if they re-marry, one party might wish to add their new partner to the deed. Whichever is the reason for the transfer of equity, it is essential to seek the services of a conveyancer to let you in on the implications. Read on to find out more.
Tax Implications — When undertaking a transfer of equity, you should expect the process to induce tax implications. The reason is that transfers are not treated the same. For instance, while property laws might consider some transfers of equity as 'gifts,' others will be considered a 'transaction at undervalue,' and the tax implications for each are different. Ultimately, the nature of the transfer determines the tax implications. For example, if you transfer part of the property to your spouse or charity, then the property will be exempt from capital gains tax. However, if the transfer is made to your children or any other person, then the transfer of equity will be subject to capital tax gains.
Stamp Duty — Transfers of equity has implications on stamp duty that is paid on a property being transferred. However, the stamp duty payable is primarily determined by the value of a share in the property. It is important to note that there are instances where the transfer of equity is exempt from stamp duty. For example, if a court orders the transfer of ownership in divorce proceedings, then the property in question is exempt from paying stamp duty. Most importantly, a conveyancer will help you to understand what type of transfers attracts stamp duty and which ones do not.
Mortgage Implications — If the property in question is a mortgage and the owner wants to transfer it into joint names, then the new titleholder will take half of the value of the outstanding debt mortgage. For instance, a property might be worth $600,000 with an outstanding debt of $500,000. If you transfer half of the title to your new spouse, then your partner will take half of the debt which is $250,000. The figure is referred to as the chargeable consideration. Therefore, it is critical to have a Deed of Trust in place when adding a name to a title that stipulates property ownership. It is especially the case if both parties are holding unequal shares on the property.
If you're looking for help with conveyancing, call a company like Ray Swift Moutrage & Associates today.