Can you Part Exchange a House with a Mortgage?

You can part exchange a house with a mortgage, provided you have enough equity to repay your outstanding mortgage balance and any associated costs at completion. A wide range of developers will be happy to part exchange with you, but this can often leave you with limited options. That’s why many homeowners consider using an independent part exchange specialist like Bettermove for a hassle-free, smooth sale.

In this blog, we explore part exchanging with a mortgage, so you know whether it’s the best option for you when you are on the hunt for a new home.

What is part exchange?

Part exchange is where your home is sold to a developer or specialist property buyer. The sale acts as a part payment towards the new home you wish to purchase. Without the need for estate agents, you avoid the delays, chains and complexities often found on the open market. Instead, you have a streamlined sale on a fixed completion date free from the stress and hassle you might otherwise encounter.

How does part exchange work with a mortgage?

For many homeowners, a mortgage is just another part of the monthly expenditure. In 2024, it was reported by Uswitch that 7.3 million households had one, but what happens when you want to sell, or better yet, how does part exchange work with a mortgage?

In short, your mortgage will get repaid from the proceeds of your sale on completion day. Whatever is left after that is used as your deposit or part payment for your new home.

Typically, this works in six steps.

1. Valuation: The developer or buyer values your home
2. Offer: They will make an offer, typically under market value (can be 80-85% or lower)
3. Redemption statement: Your solicitor gets the current mortgage balance to confirm what will clear it
4. New mortgage application: You apply for a new mortgage if one is required
5. Legal work is completed: The legalities for both properties are completed at the same time
6. Exchange and completion: Your old mortgage is cleared, your sale completes, and you move

One key thing to check is how much equity you have. You’ll want to make sure it covers both the remaining balance and any legal fees, ERCs and other costs. If it does, the mortgage isn’t a barrier at all.

Can a mortgage make part exchange difficult?

In many cases, no. Just remember to check the following:

Early repayment charges can be extremely expensive and may range from 1% to 5% of the outstanding balance, depending on how far into the fixed term you are. You should check your mortgage paperwork and speak to your lender before moving forward.

Part exchanging a mortgaged home with a developer or property buyer

When most homeowners think about part exchanging, various developers like Taylor Wimpey, Persimmon Homes or Barratt Redrow spring to mind. These, and many others, all run part exchange schemes, even if you have a mortgage, but the offering from developers is quite different to the part exchange offered by an independent property buyer like Bettermove.

Key differences:

If you want flexibility and aren’t fully set on a new build home, a specialist buyer can often be the best route to take. Transactions work at your pace, your legal fees are often covered, and the type or condition of your property won’t matter. With developers, you can find yourself a little more restricted.

Can you part exchange with negative equity?

This can be complicated. If your outstanding mortgage balance exceeds the current value of your home, you are in negative equity. In this situation, part exchange will be challenging unless you can make up the difference yourself.

If you are unsure where you stand, a new property valuation and a thorough check of your latest mortgage statement will help you understand whether part exchange is still possible.

What happens if your mortgage balance is close to the property value?

If your mortgage balance is close to your property’s current value, part exchange is still possible, but there will be less equity available for your new home.

For example:

• Property worth £250,000
• Remaining mortgage balance: £230,000
• Equity: £20,000

In this example, you’d only have £20,000 equity, which could be further depleted once an ERC or any other fees are taken into account. This could then see a significantly reduced deposit left for your new home and affect the mortgages available to you.

In some cases, low equity may mean you need a larger mortgage on your next property or a smaller deposit than originally planned. Understanding how much equity you have early on can help you assess whether part exchange is the right option.

Can you part exchange if you’re still on a fixed-term mortgage?

Yes, you can usually part exchange your home, even if you are still in a fixed-term mortgage agreement. However, it’s important to understand how your mortgage could affect the overall cost of moving.

Many fixed-rate and discounted mortgage deals include ERCs, so if you attempt to repay the mortgage before the term ends, an early repayment charge is likely to apply. As mentioned earlier, this could be as much as 5% of the outstanding balance, sometimes more.

Before proceeding with part exchange, speak to your lender and find out:

• If your mortgage has an ERC
• What the charge would be if you were to complete your sale today
• Whether the mortgage is portable
• If there are any other fees you need to be aware of

What happens to your mortgage deposit when part exchanging?

Whatever is left after clearing your mortgage and covering any costs is your equity, and this becomes the cash that helps you secure your next home. The larger the equity, the more flexibility you’ll have.

For example:

*These are example figures and are not a true representation. Your personal position may vary considerably depending on offers received, ERC totals, redemption figures and legal costs.

Can you transfer your mortgage when part exchanging?

Mortgage porting is where you move your existing mortgage deal, not the loan itself, to a new home. Not all mortgages are portable, so it’s definitely something worth checking before considering your part exchange. It can be a useful way to avoid early repayment charges as you’ll be on the same deal you had for the original home. However, affordability checks apply because you are still applying for a new loan, and if circumstances have changed since you got your original mortgage, you may find that you cannot port.

Should you speak to a mortgage adviser before part exchanging?

Yes. Speaking to a mortgage adviser before you part exchange a house with a mortgage is an extremely worthwhile first step. Their expertise will help you get a clearer picture of your current situation and the best options for you. They will be able to confirm:

• Exactly what early repayment charge you may have
• Whether you’d qualify for a new mortgage on your next property
• How your equity position will affect your LTV on the new purchase
• Whether mortgage porting is worth exploring

By getting this information early, you can plan properly and avoid any costs you may not have accounted for.

Ready to part exchange your home?

If your mortgage is unlikely to be a barrier and you still want to sell your property, speak to our team. At Bettermove, we enable you to part exchange your house without being tied to a developer’s new build site or availability. Instead, you benefit from full flexibility, receiving a genuine cash offer, and only selling when you are truly ready. We cover your legal fees and are open to making realistic offers on any property in any condition or location. Intrigued? Contact us now to get your home sold.