All Topics / The Treasure Chest / who owns the house if it’s a Interest Only Loan?
Hi guys,
when i get a interest only loan from the bank, who actually owns the house? does it belong to the bank?
DOes it mean that house has become my Liabillity (since i am not paying back any principle and the loan is always the same)Hi Fullout
The bank will have a registered first mortgage over the property and you will have an ‘equity’ interest in the property; ie your deposit + any amount paid off the principle.
The loan will continue to be your ‘liabilty’ until you have completely paid out the loan.
Cheers
David U
Good questions Fullout. The bank will hold a mortgage on the property but that is unimportant to me. The real issue (for me) is cashflow and capital gain. Say you buy a house that pays for itself and drops $40/week in your pocket after costs. Is that a good thing ? If that same property goes up 10% (or more) in one year is that a good thing ?
To me that is a yes…yes. I pay the bank for the use of it’s money and I make money from using their money. IF you stopped paying your interest payments they would foreclose and sell the property so they hve an interest in the property but don’t own it as such.As to it being a liability, Kiyosaki puts it best when he says that he only buys assets. Things that put money in his pocket from day one. So is it a liability ? Not in my view if it makes you money from word go.
Also it is good to remember what is actually the asset in a property. The house itself can appreciate in value but the tenant is the asset that helps you make money week to week and help you pay your bills. They make your profit much more healthy over time.
From the banks point of view the house is an asset but the debt is a liability. I prefer to look at things from a kiyosaki perspective. As Steve McKnight says….If you only do things that make you money then …….
Enjoy
AD [:0)]
(Andrew)“”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert Einsteinthanks AD,
i was trying to do my own Balance Sheet on my Assets and LIability and i got stuck!As usual AD you have hit the nail on the head with your thoughtful and knowledgeable response.
Cheers,
Matt.
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