Swapping is possible even without equity

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Owners do not have to have their properties paid off in order to be able to swap, contrary to popular belief. However, owner will have to be able to qualify for a new loan on the property they are swapping for. More info at How to swap... no equity
 

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When swapping existing mortgages will be paid off at closing. Since property swap involves party A buying a property from party B party A's mortgage will be paid off from party B's proceeds, while party B's mortgage will be paid off from party A's proceeds. Because most transactions are financed actual funds are coming from the mortgage companies, plus equity that either party had, (if any).