It's unconventional, but house swaps can benefit all parties if done right. Joanne Christie explains all you need to know, including rights, costs and the taxes involved.
Rather than looking to sell and buy on the open market, one option is to find someone to swap houses with you.
House swaps usually occur between people who know each other, but there are several websites where people can list their property and provide details of what they are looking to swap it for.
Aside from the attraction of finding motivated sellers in a difficult market, there may be considerable savings when using a house swapping site, compared to typical estate agent fees.
Some house swapping sites allow owners to list for free and there are no fees to pay, even when a swap is agreed – although you may have to pay legal fees if you use a solicitor, which is advised.
A study by home selling advice website TheAdvisory in July 2019 put the average estate agency fee at 1.42% of a property’s value.
If you apply this to the April UK House Price Index average house price of £251,000, estate agent fees would be approximately £3,564.
Yet people also swap for reasons other than cost savings, says Richard Ennos, site director at Easy House Exchange.
“Many people see it as a way of avoiding chains as they’ve sometimes been sold a house before, but then been stuck in a chain,” comments Ennos.
“And sometimes people have unusual houses that estate agents aren’t really going to be able to sell.
“One of our first listings was a man living on an offshore Irish island who wanted to swap for a flat in Manchester and he succeeded in doing that.”
How does a house swap work?
If you find someone who wants to swap houses with you, you may be wondering what the process involves and how it differs from any other house sale or purchase.
Fortunately, it seems that the process doesn’t vary much at all.
From a legal perspective, the process is almost exactly the same and therefore costs the same as any other property transaction says Simon Nosworthy, partner at law firm Osbornes Law.
“What people often do is just pay the balance of the difference between the agreed prices of the two properties because there’s no point one solicitor paying all of the money out one way for some of it to just come back to them.
“Other than that, it is just a normal transaction.
In terms of taxes, Stamp Duty used to be only charged on the difference in value between two properties, but HMRC changed the rules four years ago, so Stamp Duty is now due on the market value of both properties.
There was a Stamp Duty holiday for properties under £500,000 until the end of June, but this has now been tapered until the end of September before reverting back to the original rates.
Borrowing to swap
Ray Boulger, senior mortgage technical manager at mortgage broker John Charcol, says a house swap is no different to any other purchase.
“Subject to each party meeting the lender’s criteria and affordability assessment, and assuming the valuation was satisfactory and sufficient for the amount of mortgage required, there would be no reason for a lender not to offer a mortgage purely because it was a house swap.
“Each buyer would have the option of porting any existing mortgage or redeeming it and taking out a different mortgage.
“The situation is no different to anyone moving home and buying on the open market.”
It’s a good idea to mention to your broker if the deal is a privately agreed sale as some lenders don’t like these.
This is particularly the case if a property is not being purchased at market value, advises Dilpreet Bhagrath, customer experience manager for online broker Trussle.
“If it’s a private sale and the property is being bought at a reduced price, this would usually be considered a concessionary purchase,” says Bhagrath.
“In this instance, you’d need to inform your broker so they can find a specific mortgage deal that suits a concessionary purchase.”
This situation would most likely occur if the property was being part-gifted to someone by a family member, in which case you’d also need to consider the Inheritance Tax implications.
House swapping might not be the first thing that springs to mind if you’re looking to move.
Yet if you can find a suitable exchange, it may be a quicker and cheaper way to move than using the open market.
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