Home Swap Loan step-by-step: how to buy a new home before selling your current one

If you’re looking for a new home but haven’t yet sold your current one, one question usually comes up first: do you have to sell your existing home before you can buy another?

Not necessarily.

If your income allows and your current home has sufficient value, the Home Swap Loan could be the solution. It allows you to purchase your new home before selling your existing one, reducing the pressure of having to complete two major property transactions at exactly the same time.

According to Catlin Vatsel, the Head of Retail Financing at LHV, interest in this solution has grown rapidly. At the beginning of this year, demand for the Home Swap Loan increased by as much as 71% compared with the same period last year.

So what does the process actually look like?

1. Start by speaking to the bank

The first step isn’t buying your new home – it’s speaking to the bank.

The bank will assess your income, existing financial commitments and the value of your current home to determine whether the Home Swap Loan is the right solution for your circumstances. As you’ll need to manage obligations related to two properties for a period of time, it’s important to ensure you can comfortably meet your repayments throughout that period.

A Home Swap Loan is typically used by homeowners looking to move from their first home to a larger property or one that better suits their family’s changing needs.

Feel free to contact us by calling +372 699 9118 (Mon–Fri, 9:00–17:00) or email us at kodulaen@lhv.ee.

2. Buy your new home

Once your loan has been approved, you can purchase your new home before selling your existing one.

This means you can move at your own pace, carry out any necessary renovation work and avoid the uncertainty of waiting for one transaction to be completed before the next can begin.

That flexibility in timing is the greatest advantage of the Home Swap Loan.

‘The main obstacle is often not a person’s income or their desire to move to a new home, but simply the fact that selling one property and buying another rarely happen at exactly the same time,’ Catlin Vatsel explains.

3. Put your current home up for sale

Once you’ve purchased your new home, it’s time to sell your existing one.

Our experience shows that the process is most successful when the sale is handled by a professional broker. Their role is to maximise the chances of finding a buyer within the agreed timeframe and to ensure the sale progresses as smoothly as possible. For this reason, using a broker is one of the conditions of our Home Swap Loan.

You’ll generally have up to 12 months to sell your current home.

4. During the sale period, you only pay interest

While your existing home remains unsold, you can benefit from a payment holiday on the loan principal.

Once your property has been sold, we expect a partial repayment of the loan in the amount agreed upon previously. The repayment holiday then ends and your loan repayments continue according to the standard repayment schedule.

This means that during the sale period you’ll generally only pay interest, helping to keep your temporary financial commitments more manageable while you’re carrying obligations related to two properties.

5. Your regular home loan continues after the sale

Once your existing home has been sold, the proceeds are used to repay the Home Swap Loan, leaving you with a standard home loan for your new property.

From that point onwards, your loan continues under the normal repayment schedule.

What else should you know?

Although the Home Swap Loan offers considerable flexibility, it also requires careful planning.

Before making a decision, it’s worth considering a few important questions.

• Is your current home listed at a realistic market price?
• Do you have a sufficient financial buffer in case the sale takes longer than expected?
• Can you temporarily manage higher monthly expenses?

According to Catlin Vatsel, the Home Swap Loan is ultimately a matter of timing. ‘It allows you to buy your new home at the right moment without having to wait until your current home has been sold. At the same time, it requires realistic pricing, careful assessment of the risks and a sufficient financial buffer in case the sale takes longer than expected.’

Who is the Home Swap Loan best suited to?

LHV’s experience shows that the Home Swap Loan is most commonly used by families with children aged between 26 and 45 who already own their first home. In most cases, they’re not moving for investment purposes, but because their family has grown, their workplace has changed or their current home no longer meets their everyday needs.

If you’ve already found your next home but haven’t yet completed the sale of your current one, the Home Swap Loan could be the solution that helps bring the two transactions together smoothly.

LHV Home Swap Loan