Can I Part Exchange My House for a Cheaper One?

Yes, you can part exchange your house for a cheaper one but the route you take matters. If you are buying a new build through a developer scheme, strict eligibility rules often make downsizing difficult or impossible. However, through an independent part exchange provider like Bettermove, there are no fixed value ratio restrictions, meaning you can part exchange to a cheaper, similar, or more expensive property on your own terms. In this guide we explain both routes, what happens to your equity, and how to decide which option is right for you.

What does part exchanging for a cheaper property mean?

Part exchange is where your current home is used as a part payment towards your next one. The difference in value is either settled by the buyer or returned to you as cash.

When part exchanging to a cheaper home, the equity held in your current property is likely to exceed the price of the new one, meaning you can walk away with a lump sum once the sale has completed. You might also find that you are either mortgage-free or benefiting from lower mortgage costs with the new home, too!

However, it isn’t always straightforward; the route to part exchange your house for a cheaper one will vary depending on the type of home you are buying.

How can you part exchange your house for a cheaper one?

There are typically two routes to part exchange for a cheaper property. Our table below gives you an at-a-glance view of the two options you can consider:

New build developer schemes

Many major homebuilders, such as Barratt and Taylor Wimpey, offer part exchange schemes. However, if you are planning to downsize to a cheaper home, you might find yourself bound by very strict rules.

This means that in many cases, the developer may require your current home to be worth no more than 70-80% of the value of the home you wish to buy.

The reason for this is that the developer doesn’t want to be taking on a property worth significantly more than the home you are planning to buy. In some cases, your home may be too valuable to qualify for their scheme.

Example:

• Your current home is worth £350,000
• You want to buy a new home valued at £280,000
• Your current home is worth 125% of the new property and therefore likely outside the preset criteria

In an example like this, an independent part exchange company might be a more suitable option.

New build developer schemes by developer

Many of the largest property developers offer part exchange for those looking to downsize as well as upsize, whereas others will only consider part exchange if you are planning to buy a more expensive home. We’ve looked at three of the leading property developers in England to see how their part exchange schemes work and what value ratio there may be.

*Criteria may vary by development, always confirm directly with the developer.

Independent part exchange companies

Independent companies are far more flexible and may offer you a more guaranteed route to part exchange for a cheaper property. They are not tied to a specific development and don’t have the same value restrictions that often prove to be so limiting.

Key differences when compared to using a developer include:

• No requirement on the value ratio between your current and new home
• Can be used for new build or older properties
• No geographical restrictions in many cases
• Your home just needs to be mortgageable

One thing to be wary of is that you won’t receive market value for your home, with 80-85% often typical. That said, the trade-off for value gives you speed, certainty, less stress and no chain.

What happens to the difference when you part exchange for a cheaper home?

Perhaps one of the biggest questions those downsizing want answered.

When you part exchange your home for a cheaper property, the equity from your home that exceeds the price of the new one is returned to you in cash at completion. The part exchange provider buys your home, deducts the cost of the home you are buying, along with any outstanding mortgage, then gives you whatever is left.

Example:

• Part exchange value of your current home: £350,000
• Price of the new, cheaper property: £280,000
• Outstanding mortgage: £50,000
• Returned to you: £20,000

Can I part exchange for a cheaper property?

Not everyone is eligible to part exchange their home for a cheaper property. Each provider may have very specific criteria. In many cases, the independent part exchange companies will want your home to meet the following:

• The home must be owned by you: Part exchange is not available to first-time buyers or renters.
• Your home must be mortgageable: It should be in reasonable condition and of standard construction.
• You should have sufficient equity: You’ll need enough equity to cover the purchase of the cheaper home and any outstanding mortgage.
• The property should not be an ex-local authority: Some providers will exclude these, but this can vary, so you should check in advance.

What are the benefits of part exchanging for a cheaper home?

Part exchange can be a great option for those looking to downsize or release equity. From less stress to no chain, it can be a welcome route to sale if speed is a priority.

• No chain: You’ll be a chain-free buyer, which can make sellers prioritise you over other buyers as they know you can buy the home right away.
• Guaranteed sale: You don’t need to wait for a buyer or organise viewings and be let down by last-minute reluctant buyers.
• Move when you are ready: You remain in control of when you move, allowing you to align your sale with when your new home is ready to buy.
• Equity release: If your current home is worth significantly more than the new one, you can release equity without all the typical equity release complications.
• Less stressful: The managed process makes things much smoother and stress-free, removing most of the complications and worry that come with the traditional sale or purchase.

What are the drawbacks of part exchanging for a cheaper house?

Despite the positives, there are also some negatives worth noting. Whether these have a big effect on your decision is down to personal preference, but be aware of:

• Below market value offers: You might receive 80-85% of the market value of your home. Possibly less.
• New-build restrictions: If you prefer the developer scheme, you may find you are ruled out due to rules on value ratio.
• Property condition requirements: In some cases, homes that need substantial repair or are not built of standard construction may not be accepted.

If you want to generate the highest possible sale for your home and do not mind waiting for the market to align with your goals, selling via the traditional open market may be best. If you prefer speed, certainty and a sale when you want it, part exchange can offer a solution.

Which option is better for downsizers?

If you are still unsure whether to part exchange your home for a cheaper one or sell it via the traditional market, our handy table gives you a breakdown of the key considerations.

For downsizers looking for a fast move without any complications, part exchange can make sense, even though the offer is likely to be below market value.

Part exchanging with Bettermove

If part exchanging your house for a cheaper one is something you are considering, speak to Bettermove. We provide you with a no-obligation offer on your home, regardless of its condition or type, to give you a realistic idea of just how much you can part exchange for. Then, if you are happy to proceed, we’ll fully manage the process to ensure your house is sold exactly when you want it to be. What’s more, you can part exchange your house with Bettermove without paying any fees, meaning you pocket more of what your house sells for. Contact us today to get your free cash offer.