With rises to house prices, inflation and the cost of living, it has become even harder for first-time buyers to take a step onto the property ladder. According to the ONS, just half of UK residents aged between 35-45 currently have a mortgage, compared to two-thirds 25 years ago.
This has led some parents to consider gifting their property or transferring equity to their children. However, is it a straightforward process? What are the pros and cons to gifting property?
In this guide to transferring home ownership, you’ll find out everything you need to know about gifting property to children.
Gifting property to children comes with its share of implications so it’s important to seek specialist advice first. Your local CJ Hole branch will be able to put you in touch with a conveyancer who will be able to advise you.
Gifting property to children: What are my options?
There are two ways in which you can transfer the property ownership from the parent to the child:
- Transfer the equity
- Transfer the ownership of the property
Transferring equity to your children
Transfer of equity involves adding a new person to a property’s deeds while the current owner remains listed. It’s sometimes used to add a new partner or spouse, however, can be used to transfer partial ownership to children.
Things to consider before transferring equity
When equity is transferred, it’s seen as a property transaction from a tax perspective. This would mean:
- Your child may still have to pay stamp duty if the value of the transferred portion of the property exceeds £250,000
- They will no longer be considered a first-time buyer and as such, will not be eligible for government-backed schemes, such as Lifetime ISAs
To help the process move forward quickly, it’s important to:
- Locate the title deeds of your home
- Notify your mortgage lender (if applicable)
- Make sure you’ve agreed the specifics of the agreement – for instance, how much is being transferred and who will live in the property?
Transfer the ownership of the property to your children
Also known as Deed of gift or Transfer of gift, transferring the ownership of property involves gifting your home in its entirety to your children. The main draw of this, of course, is your children may not have to pay the hefty 40% inheritance tax they would otherwise incur if they inherited your home.
Things to consider before transferring the ownership of the property to your children
- Your children will still have to pay inheritance tax on the property if you die within seven years of gifting your home to them
- If you still live in the property, you must pay rent at the market rate and contribute to household expenses
- Gifting a buy-to-let property to a child may have capital gains tax implications
How much does it cost to transfer the ownership of property?
When gifting your home to children, you should instruct a qualified conveyancing solicitor to handle the legal aspects of transferring ownership. Your local CJ Hole branch will be able to put you in touch with a conveyancer who will be able to help.
But how much will this cost? Conveyancing fees vary between £500 and £1,500 or higher. They include expenses related to title searches, document preparation, and other costs involved in the property transfer process.
Related: Your guide to conveyancing
How long does it take to transfer the ownership of property?
Providing your title deeds are accessible and there are no other complexities involved, gifting property to children should take between 2-3 weeks. Transferring a portion of the equity may take a little longer. You should allow between 4-6 weeks for this.
That said, transferring equity will take more time if there is a mortgage on the property. After all, the mortgage provider must approve the transfer and make sure the new owner can make the repayments.
The pros of transferring property ownership to your child
- Owning a home isn’t an option for some – especially for single or low-income households. This will help your children to take their first step onto the property ladder
- It may circumvent any future inheritance tax charges
- The process may take less time than buying a property
The cons transferring property ownership to your child
- If you decide to remain in the property, you will still have to pay rent at the current market rate, as well as any household costs
- Gifting or transferring property to your children means you no longer have ownership rights, which can potentially leave you in a vulnerable position
- Transferring property to your children could be seen as an attempt to hide assets and avoid paying for care. The local authority may then reverse ownership back to you and include this in their means testing for funding
Summary: Should I gift property to my children?
Only you can decide whether this is a good option for you. Remember, this is your decision to make and yours alone. You should never feel pressured into deciding anything and always talk to a legal expert beforehand.
Further reading
How to save for a mortgage by living at home
The dos and don’ts of buying your first home
To find a conveyancing solicitor to manage the transfer of your property, speak to your local branch.
