All Topics / The Treasure Chest / who owns the house if it’s a Interest Only Loan?

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  • Profile photo of fulloutfullout
    Member
    @fullout
    Join Date: 2003
    Post Count: 233

    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)

    Profile photo of DavidUDavidU
    Member
    @davidu
    Join Date: 2001
    Post Count: 101

    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

    Profile photo of ADAD
    Participant
    @ad
    Join Date: 2002
    Post Count: 636

    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 Einstein

    Profile photo of fulloutfullout
    Member
    @fullout
    Join Date: 2003
    Post Count: 233

    thanks AD,
    i was trying to do my own Balance Sheet on my Assets and LIability and i got stuck!

    Profile photo of MathewMathew
    Participant
    @matymathew
    Join Date: 2003
    Post Count: 41

    As usual AD you have hit the nail on the head with your thoughtful and knowledgeable response.

    Cheers,

    Matt.

Viewing 5 posts - 1 through 5 (of 5 total)

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