Author Topic: If You Have a Mortgage, You Don't "Own" Your House. What Is An Accurate Term?  (Read 9828 times)

mike_R

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If someone has a mortgage, they don't own the house yet so whats an accurate term for the status?

I know most people say 'own the house' but I want a correct word/term.

brewer12345

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How about "flapdoodle?"

Hate to tell you this, sport, but they do own the house.  They just have borrowed against its value.

arebelspy

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If someone has a car loan, they don't own the car?

What if I buy an iPad with my credit card.  Do I not own the iPad until the credit card is paid off?

The person with a mortgage certainly does own the home.

What you are looking for is the term when they have it debt-free, which is called owning it "free and clear."  The opposite would be owning it, but with a mortgage.
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TygerTung

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Own it freehold when you don't have a mortgage on it?

tomsang

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If someone has a mortgage, they don't own the house yet so whats an accurate term for the status?

I know most people say 'own the house' but I want a correct word/term.

You never own your property. If you don't pay your property taxes "your" property is seized and sold by the government. If you try to build or do activities that are deemed inappropriate then your property is seized. You are able to use the property for a fee. For that privilege you pay a price as a purchase, but you never get out of paying the government and abiding by their rules.

The only time that owning property makes investment sense over long periods of time is when you have a loan and can use leverage. Over long periods of time real estate increases by inflation plus a percent or two. The stock market typically earns inflation plus 3 or 4 percent. If you have an 80 percent loan you are getting 5 times inflation which out performs the stock market. Of course if real estate tanks, then the leverage compounds the losses.

dragoncar

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If someone has a mortgage, they don't own the house yet so whats an accurate term for the status?

I know most people say 'own the house' but I want a correct word/term.

You never own your property. If you don't pay your property taxes "your" property is seized and sold by the government. If you try to build or do activities that are deemed inappropriate then your property is seized. You are able to use the property for a fee. For that privilege you pay a price as a purchase, but you never get out of paying the government and abiding by their rules.

The only time that owning property makes investment sense over long periods of time is when you have a loan and can use leverage. Over long periods of time real estate increases by inflation plus a percent or two. The stock market typically earns inflation plus 3 or 4 percent. If you have an 80 percent loan you are getting 5 times inflation which out performs the stock market. Of course if real estate tanks, then the leverage compounds the losses.


http://youtu.be/4DI5Z_6gWVY

Seriously though, yeah you own your house.  If you want to say you "own a mortgage" to distinguish from free and clear, then fine. 

They fact that tax lien holders have to foreclose on your property is evidence enough that you still own it subject to tax payment.  The government can't just sell your house without first acquiring it by legal means

prof61820

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You "own" the equity in your house and other various ownership rights like the big one, "possession."  You can also deduct any interest paid on your mortgage from your annual taxes.  As long as you pay your mortgage, you will eventually "own" the home in full.  Your "ownership" rights may be modified by legal actions relating to your mortgage and other liabilities - including bankruptcy - that depend on what State you live in.  Some States property protection laws are better than others.  For instance, there is a good reason OJ Simpson bought a mansion in Florida.
« Last Edit: October 20, 2013, 08:10:26 AM by prof61820 »

2527

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You own the house, with or without the mortgage.

arebelspy

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If someone has a mortgage, they don't own the house yet so whats an accurate term for the status?

I know most people say 'own the house' but I want a correct word/term.

You never own your property. If you don't pay your property taxes "your" property is seized and sold by the government. If you try to build or do activities that are deemed inappropriate then your property is seized. You are able to use the property for a fee. For that privilege you pay a price as a purchase, but you never get out of paying the government and abiding by their rules.

The only time that owning property makes investment sense over long periods of time is when you have a loan and can use leverage. Over long periods of time real estate increases by inflation plus a percent or two. The stock market typically earns inflation plus 3 or 4 percent. If you have an 80 percent loan you are getting 5 times inflation which out performs the stock market. Of course if real estate tanks, then the leverage compounds the losses.

(Emphasis mine.)

Well that's sure not true.

It makes sense whenever the total cost of ownership (and by "cost" I mean everything - positive and negative - in terms of expenses, costs such as a mortgage, if any, as well as all positive benefits such as tax benefits, and what returns it generates you via inflation) is higher than the costs of renting.

For example, you claim that it only makes sense via using a loan and leverage (above).  We can clearly see this is not true in an absurd case where the house costs $1, maintenance is $100/mo, and taxes and insurance are $100/mo.  Total cost = $200/mo.  Renting that same house would cost $1000/mo.  You own it free and clear (it cost $1), but there's still a benefit to owning it, even without leverage.

This is clearly a silly example, but there are cases where it makes more sense to own rather than rent just due to the amount of money it saves you - with a mortgage or without.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Daleth

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You never own your property. If you don't pay your property taxes "your" property is seized and sold by the government. If you try to build or do activities that are deemed inappropriate then your property is seized. You are able to use the property for a fee. For that privilege you pay a price as a purchase, but you never get out of paying the government and abiding by their rules.

I have my own issues with American-style zoning--don't get me started!--but "ownership" does not mean "the right to do whatever the heck you want and everyone else be damned" or "the right to access or otherwise benefit from local services without having to pay property taxes for them."

And let me add my voice to the choir here of people saying that you do own your house when you have a mortgage. Answer me this: can you get a mortgage on a house you don't own? Of course not. One of the rights that comes with ownership is the right to take out a loan on the property--and of course the bank will require you to agree, as a condition of granting the loan, that if you don't repay it they can take your property. That doesn't mean you don't own it. It just means you took out a loan against it.

arebelspy

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Answer me this: can you get a mortgage on a house you don't own? Of course not.

Pretty tough to get a mortgage on a property you don't own, but I do have a mortgage on a property I no longer own; there are always edge cases.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

2527

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Also, just because you own a company, doesn't mean you can do whatever you want with it.  You still need licenses, you need to handle customer issues in compliance with certain laws, etc.  If you don't pay your taxes or your bills, the government takes certain actions. 
« Last Edit: October 20, 2013, 10:37:42 AM by 2527 »

Daleth

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Answer me this: can you get a mortgage on a house you don't own? Of course not.

Pretty tough to get a mortgage on a property you don't own, but I do have a mortgage on a property I no longer own; there are always edge cases.

It's not "pretty tough," it's impossible. You can't get a mortgage on a house you don't own because you don't have any right to offer the house as collateral.

Undecided

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Own it freehold when you don't have a mortgage on it?

I liked flapdoodle better, since in many places in the English-speaking world, freehold already means something specific in the real estate context (basically no different than what most Americans mean when they say "own" in the context of real estate).

MrsPete

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If someone has a mortgage, they don't own the house yet so whats an accurate term for the status?

I know most people say 'own the house' but I want a correct word/term.
A word exists:  It's indebted. 

I know what you're trying to say.  If you're still paying a mortgage, you own the house . . . contingent upon continuing to make the payments.  That, for the vast majority of people, is contingent upon keeping your job and a couple other things.  It's not quite the same thing as having made that last paying and being able to say that it's really and truly, 100% yours, yours, yours. 

To be technically correct, you could say that you and the bank own the house together.

If someone has a car loan, they don't own the car?

What if I buy an iPad with my credit card.  Do I not own the iPad until the credit card is paid off?
If you're making payments on anything, it's not fully "yours".  If you're still paying for today's car, you're a bit like the person who's living paycheck-to-paycheck; that is, your payments are running concurrent with the items you're using.  That's not a perfect analogy, but the point is that if you're making payments, the item isn't totally "yours" yet.   

Making a payment with a credit card is a little more fuzzy.  In that case, the store is paid for the merchandise, and you owe a debt to the VISA company.  It's an unsecured debt tied to your good credit rather than the iPad itself.  Assuming you pay it off when the bill arrives, small purchases don't "feel" like they're in the same category as houses and cars. 

You never own your property. If you don't pay your property taxes "your" property is seized and sold by the government. If you try to build or do activities that are deemed inappropriate then your property is seized. You are able to use the property for a fee. For that privilege you pay a price as a purchase, but you never get out of paying the government and abiding by their rules.
Disagree.  You can own the property outright, . . . but that doesn't mean you are free from maintenance costs (and taxes are a maintenance cost), and owning your property doesn't mean you're free to ignore the laws of the land. 


grantmeaname

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To be technically correct, you could say that you and the bank own the house together.
Except that the title's fully in your name, so that's technically incorrect. (The best kind of incorrect?) I understand what the thread and OP are getting at, but that's not 'ownership', it's 'feelings'.

MrsPete

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To be technically correct, you could say that you and the bank own the house together.
Except that the title's fully in your name, so that's technically incorrect. (The best kind of incorrect?) I understand what the thread and OP are getting at, but that's not 'ownership', it's 'feelings'.

I don't think that's true.  I think that when you have a mortgage, your name and the bank's name are on the title.  I am 100% certain that a lender's name (if one exists) is on a car title.  Of course, I haven't had a mortgage in over a decade, so I'm thinking back a long way. 


grantmeaname

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Yeah, I guess the lienholder is on it too. But you're like the residual claimant - the lienholder has limited rights to it, mostly in the case of a default, and you retain all the others. That's not really ownership, it's more of an encumbrance.

hoodedfalcon

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The house is the collateral for the loan, so the bank only has a security interest, not ownership. The security interest follows the item, not the person who took out the loan, so that is why they are listed on the title. Once the lender is repaid, the lender no longer needs your property as collateral and their name comes off. A title search/title insurance is all about making sure there are no outside security interests in the property before it transfers ownership to another party, because the next buyer certainly doesn't want to have to pay off a prior owner's loan, and no lender will give you a loan if their security interest is going to be secondary to another lenders security interest.

« Last Edit: October 20, 2013, 03:57:46 PM by hoodedfalcon »

beltim

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MrsPete -
I completely disagree with you here.  "Ownership" has a very specific meaning - the legal right of possession.  In every sense the owner, not the lender, completely owns the house.  If the lender had any claim on ownership, their permission would be needed to sell the house.  This is not the case - the lender has no agency in selling a house with a mortgage on it.

Sneezy

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If I "own" shares of a stock and the company goes bankrupt, the claims of the company's creditors on the assets of the company take precedence over mine. It's as if they have greater ownership rights in the company than I do.

It's interesting how many different interpretations there can be of such a seemingly simple word. :)

grantmeaname

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If I "own" shares of a stock and the company goes bankrupt, the claims of the company's creditors on the assets of the company take precedence over mine. It's as if they have greater ownership rights in the company than I do.
This is exactly analogous, in fact- you're the owner and they're lienholders. In both cases "owns" doesn't mean "wins all the time", but it does mean something along the lines of "holder of all rights not explicitly assigned to another party".

dragoncar

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MrsPete -
I completely disagree with you here.  "Ownership" has a very specific meaning - the legal right of possession.  In every sense the owner, not the lender, completely owns the house.  If the lender had any claim on ownership, their permission would be needed to sell the house.  This is not the case - the lender has no agency in selling a house with a mortgage on it.

Right, the bank also has no say in whether you paint, remodel, take tenants, etc.

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MrsPete

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If I "own" shares of a stock and the company goes bankrupt, the claims of the company's creditors on the assets of the company take precedence over mine. It's as if they have greater ownership rights in the company than I do.
This is exactly analogous, in fact- you're the owner and they're lienholders. In both cases "owns" doesn't mean "wins all the time", but it does mean something along the lines of "holder of all rights not explicitly assigned to another party".
Okay, this may be the best answer yet.  Having a lien on your house DOES mean that is isn't entirely your own.  It means you're not entirely free and clear, you can't do absolutely anything you want.  For example, if the bank owns part of your house, they can force you to pay PMI insurance, carry homeowners insurance, and if you stop making payments you'll find out in a hurry that they can assert their will over you! 

True, they don't have the right to walk into the house anytime they want or make decisions about how you'll use the property, those rights are reserved for you the owner-occupier.  But the bank does have some rights over a property that they partially own -- and we still don't have the perfect word for it.  I vote, again, for indebted. 

Watchmaker

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But even if you don't have a mortgage, you are not "entirely free and clear" to do "absolutely anything you want" (at least, not in most countries). 

galaxie

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If someone has a mortgage, they don't own the house yet so whats an accurate term for the status?

I know most people say 'own the house' but I want a correct word/term.
A word exists:  It's indebted. 


A word exists: you own the house, and also have a mortgage on it.