How to exchange an apartment / house with and without a loan?

On the Polish real estate market, transactions of exchanging an apartment for a house or a house for an apartment are rarely carried out. The matter is even more complicated if the property in question has a mortgage on the owner mortgage. How to carry out a conversion transaction if there is a loan on the apartment or house, and how, when there is no such burden?

Real estate exchange without a loan

When exchanging an apartment for a house or a house for an apartment without a loan, it is necessary to sign an exchange agreement between the interested parties. This is a so-called mutual transaction, regulated by Art. 603 of the Civil Code. The exchange contract does not differ from an ordinary sales contract, often concluded in consumer practice, but must take the form of a notarial deed. In art. 603 indicates the essence of such an agreement. By concluding it, each party undertakes to transfer ownership of the thing to the other in return for the commitment to transfer ownership of another thing.

The subject of the exchange may be:

  • ownership of a house or flat,
  • cooperative ownership right to a dwelling.

The exchange agreement should specify the exact amount of the additional payment to be borne by one of the parties in relation to the difference in the value of the property, if such conditions have been agreed. Additional details of the conversion, along with the date of handing over the flat or house, should also be included in the contract. It should be remembered that a formal issue related to the conversion is also the need to make appropriate entries in the land and mortgage registers of such real estate.

Tax issues related to real estate conversion

A measurable benefit related to the exchange of real estate for the parties to the contract is a lower tax and lower overall transaction costs than in the case of selling an apartment or house and subsequent purchase of another real estate. In the case of a conversion transaction, the notary fee is charged only on the value of the more expensive real estate which is the subject of the exchange, and the parties can simply divide the burden between them.

In addition, there is the issue of tax on civil law transactions. If you buy a flat, for example, you have to pay 2 percent. on the value of the property by way of PCC. There is no avoidance of tax when converting, but it is charged on the difference in value of both properties.

Exchange of a mortgage-encumbered property

The exchange of a flat or house for another residential property is also possible when they are encumbered with a mortgage established for the benefit of the bank. The basic condition is that the bank agrees to the conversion transaction.

He will first check the value of the second flat or house for which the borrower wants to exchange, because in the future it may constitute a potential security for a mortgage that has not yet been repaid. Banks approach the issue of changing the subject of mortgage collateral in different ways and an owner who wants to replace, for example, his current apartment with a larger one or a house for an additional fee, may encounter some problems.

It is possible that the bank, under certain conditions, will sign an annex with the customer, enabling him to make the switch, but will also offer slightly worse credit conditions, in accordance with the currently applicable ones. The borrower is exposed to to charge a higher credit margin, which will increase costs.

Replacing an apartment for which a loan in Swiss francs has been taken, may be the only way to change the apartment to a larger one or simply another one. The sale of real estate with such a loan would probably not allow the bank to be repaid. That is why many borrowers - franchisees want to switch. The flat or house, into which the existing real estate, which is the subject of mortgage security, is being converted, should be at least worth the same amount. The mortgage could then be transferred to the new property, at least theoretically. At a lower value, the bank may require the borrower to provide additional collateral.

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