Can you permanently swap a house instead of buying?

By   |   Verified by David Boyd   |   Published 27th May 2021

Apartment room

The idea of house swapping might make you think of a holiday in an exotic place (or the plot of The Holiday, where Cameron Diaz and Kate Winslet house swap), but we’re actually talking about permanently trading your house for someone else's.

So if you are interested in swapping homes instead of a more traditional sale and purchase, here's what you need to know.

What is house swapping?

House swapping is a transaction where you simultaneously trade properties with another homeowner. It involves two transactions where both parties sign an agreement for each property being traded. If one or both properties have a mortgage attached, the lender will be paid when the sale is closed.

A swapping case near Brisbane was aptly dubbed the “two for one deal”.

Swapping vs selling or buying

The process of swapping is not too dissimilar to a standard property sale and purchase. The main difference is that straight swaps happen simultaneously, eliminating any time gap between buying and selling.

People who elect to do a permanent swap are still eligible for a home loan to cover any price differential between the properties, or the difference between the notional exchange price and their existing home equity.

There are dedicated websites like the Property Exchange Networx or Property Swap to browse for properties to swap. You can even find properties offered for exchange on Gumtree.

Yes. It’s simply an unusual way of effecting a property transfer. There’s nothing illegal about it, provided you follow all the rules about transferring titles.

Can you swap houses without paying stamp duty?

No. This is a common misconception. You will still need to pay stamp duty (also known as transfer duty in some states) on the market value of the property you are acquiring when the title is transferred. You may need to engage the services of a professional valuer to establish the market value.

Who can swap a house?

There are no separate or special conditions to be able to swap a house when compared to selling or buying a house. As well, anyone that a lender would consider a suitable candidate for a home loan when purchasing a house should also be eligible to obtain a loan for their new property following a house swap.

House swapping process

  1. Find a property you are interested in swapping with. This may involve some compromises, with far fewer swap options available compared with the standard property sales market.
  2. Negotiate with the other owner a swap price for each property, and any cash difference to be paid. For example, you may agree with the counterparty in the swap that your current property is worth $950,000, while theirs is worth $875,000. In this case they would need to pay you $75,000 when the property titles are transferred.
  3. If you still owe money to your existing home loan lender, in excess of any cash you may receive as a result of the swap (or because of any cash you will have to pay if the other property is more expensive) you will need to arrange a new mortgage.
  4. Each party will need to sign a separate agreement for each property being transferred. It would be a good idea to use the services of a solicitor or conveyancer to prepare the contracts, pay out any existing mortgages, and arrange title transfers and stamp duty payments.
  5. Agree on a settlement day, to surrender your own property and take possession of the new one.

Pros & cons

Pros

  • Avoid the buying and selling process, which can be stressful.
  • Save money on marketing and real estate agent fees.
  • You don’t have to do a straight swap of developed property. Other collateral like a yacht or land could be swapped.
  • You may be able to pocket some cash, if the property you are moving to is worth less than yours.

Cons

  • You still need a conveyancer or solicitor to complete the transaction and make it legally binding.
  • There will inevitably be fewer options for a house swap compared with what’s on sale in the standard property market.
  • The process can be a little complex if there are any outstanding mortgages in the deal.
  • There could be a substantial difference in value in the swap, which could leave you with a shortfall.