A technique known as house swapping has emerged as a creative solution to a slow housing market. As the name implies, house swapping is an exchange of properties between two homeowners, one of whom may use a second mortgage to make up any difference in price. 

House swapping can help homeowners move their properties in a slow housing market, and in the process may save both parties in real estate fees and other costs. Homeowners looking to swap into a more expensive property might want to start by contacting second mortgage lenders to see how they would accommodate this type of program.

Necessity and Technology Take a Hand

While house-swapping isn't new, its rise in popularity is partly a function of necessity, and partly a function of technology.

The necessity, of course, stems from the slow housing market. Not only does slow sales volume require people to find new ways to move their properties, but the longer time properties are spending on the market increases the chances of homeowners finding the right match for a swap.

Technology aids the process as the Internet can make it easier for homeowners to find a match. The Internet can also facilitate researching second mortgage lenders and getting second mortgage quotes, since a second mortgage can be essential to the process when the properties are mismatched in value.

How House Swapping Works

House swapping works when two parties who are interested in each other's properties agree on terms of a swap. If there is a difference in the values of the properties, the original owner of the lower-valued property would pay the difference to the other homeowner, perhaps via a second mortgage.

The mechanics of this depend greatly on the mortgage details -- how much of the existing mortgages are paid up, whether they are assignable, and whether there are penalties for early repayment. A second mortgage lender could help sort through these details, though each party will want to carefully review the financial implications. And the current lenders may be willing to renegotiate existing loans or bend rules if the alternative is taking on a foreclosure loss.

Possible applications for this technique include parties wishing to relocate, those looking to move up or down in house size at various stages of life, and in some cases, even home builders willing to take an existing property as a "trade-in."

Source:

Chicago Tribune