What happens to mortgages?

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).
 

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Did you know that....

keep equity
One of the biggest advantages of trading properties versus selling in a declining market is value preservation. Both parties in a trade can agree on the property values they are comfortable with, and not the values dictated by foreclosures and short sales in the area. More info at How to swap...