Barter

Collateral Swap - In a collateral swap, the security for an existing loan is transferred from one property to another. The lending bank releases the land charge on the original property and, in return, receives a new land charge on a replacement property. This instrument is particularly relevant when selling a property with an existing mortgage, if the loan is not to be paid off but rather transferred to a new property.

Process and Requirements

The mortgage swap begins with an application by the borrower to their bank. The bank assesses whether the replacement property is suitable as collateral-key factors include market value, location, condition, and rentability. The loan-to-value ratio of the new property must sufficiently cover the outstanding balance (typically at least 60% loan-to-value). If the bank agrees, the land charge on the old property is discharged and registered on the new property at the notary’s office. The entire process typically takes 6-10 weeks, as two land registry offices may be involved.

In practice, timing is the crucial factor: The mortgage swap must be coordinated so that the cancellation on the old property and the registration on the new property take place as close together as possible. The land registry offices for both properties must be notified, and the notary coordinates the escrow process. Thorough preparation and early communication with the bank minimize the risk of delays.

Advantages over debt restructuring

A mortgage swap is often more cost-effective than a complete debt restructuring. In a debt restructuring, the old loan is repaid early, which triggers an early repayment penalty-which can quickly amount to five-figure sums for long-term loans. With a mortgage swap, the loan remains in place; only the collateral changes. The only costs incurred are land registry and notary fees for the cancellation and new registration (approx. 0.5-1.0% of the mortgage amount). Additionally, the existing loan terms remain unchanged, which can be a significant advantage if the old interest rate is favorable.

A concrete example: For an existing loan of 300,000 euros with a 1.5% fixed interest rate and five years remaining, the prepayment penalty-if the mortgage swap is waived and the debt is refinanced at the current interest rate of 3.5%-can easily amount to 20,000-30,000 euros. A mortgage transfer, with costs of approximately €3,000-5,000, is then the clear economic alternative.

Mortgage Transfer in a Simultaneous Sale and Purchase

The typical practical scenario: An owner sells their home in Nuremberg and simultaneously purchases a new property. The existing loan with a favorable interest rate is not to be paid off. Instead, the loan is transferred to the new property. The purchase price of the sold property is used partly as equity for the new purchase and partly to repay the portion of the loan that is no longer covered by the new property.

Practical Tip for Homeowners in Nuremberg

We recommend that homeowners in the Nuremberg metropolitan area who wish to sell a property and purchase a new one at the same time consider a mortgage transfer as an alternative to refinancing. Especially in the case of favorable existing contracts with fixed interest rates below 2%, a mortgage transfer is almost always financially worthwhile. Contact your bank early on-ideally before the notary appointment for the sale. Not all banks offer mortgage swaps; regional institutions such as Sparkasse Nürnberg or Volksbank Raiffeisenbank Nürnberg are, in our experience, more cooperative in this regard than some direct banks.

We coordinate the timing of the sale and purchase for our clients so that the mortgage swap can be carried out without any issues. Good coordination between the real estate agent, notary, and bank is the key to a smooth process.

Frequently Asked Questions

Am I entitled to a collateral swap?

No, there is no legal entitlement to a collateral swap. The bank decides at its own discretion whether to swap the collateral. In practice, however, banks are often willing to agree to a collateral swap if the borrower has a strong credit rating and the replacement property provides equivalent or better security. A refusal usually occurs if the new property has a significantly lower mortgage lending value.

What costs are involved in a collateral swap?

The costs consist of: Discharge of the old land charge (notary + land registry approx. 0.2% of the amount), new registration on the replacement property (notary + land registry approx. 0.5-0.8% of the amount), and a processing fee charged by the bank (usually 200-500 euros). For a land charge of 300,000 euros, the total costs thus amount to approx. 2,500-4,000 euros - significantly less than an early repayment penalty.

Can I combine the mortgage swap with a loan top-up?

Yes, many banks offer to increase the loan amount as part of the mortgage swap if the new property is more expensive than the old one. The increase is then agreed upon at current terms, while the old contract continues under its previous terms. This results in two loan tranches on the same property. This combination is particularly attractive if the old interest rate is significantly below the current market rate.

What happens if the sale and purchase do not follow each other seamlessly?

If there is a gap between the sale and the purchase-for example, if the purchase of the new property is not completed until months after the sale-the loan must remain unsecured during this period or be secured by a bridge financing solution. Some banks accept alternative collateral during this period (e.g., a securities account); others require a temporary repayment of the loan. The exact terms must be clarified with the bank in advance.

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