In the real estate world, the practice involves a permanent exchange – property for property; you buy their house, and they buy yours.
Capita Mortgage Broker Adam Donald said the process could further involve transferring a mortgage from your old property to your new one – called substituting the security. is essentially means swapping out one property for another with the assistance of a lender.
“Substituting security in the context of mortgages typically refers to replacing one property with another,” Mr Donald said.
“For example, if the borrower’s circumstances change and they are no longer able to obtain finance on a new purchase, they may propose substituting it with another property such as a different property, which is usually of lesser value.”
The direct swap of two properties isn’t something you often hear about in the Western Australian market, although it does happen, with the practice being most common with downsizers and empty nesters, according to Mr Donald.
Realmark Licensee John Percudani said he could see house swapping becoming more widespread in the current WA market conditions.
“It certainly wouldn’t surprise me if it becomes more of a trend with the market as tight and competitive as it is,” he said.
“Clients are utilising tools such as rent-back agreements, short-term finance and delayed settlements to make a transaction possible in a low-stock, high-demand market.
“It makes sense a direct property trade could be something we start to see more of in Perth.”
For the full article, see the Saturday 23 March edition of The West Real Estate.