If You Owe Money on Your Home, Do You Really Own It?

If you are like most people, when you buy a home, you finance most of the purchase with money borrowed from a bank, mortgage company, or other lender. When you do, the lender secures their loan to you through a mortgage. Does this mean that the bank technically owns the house until you make the final payment? The answer is no.

When your bank loans money to you and secures the loan with a mortgage, the mortgage gives them the right to hold a lien on your property. You become the owner and, as the owner, you have all rights of use and enjoyment of your property. You may agree in the mortgage not to take actions that intentionally diminish the value of the property, or you may be prohibited by the terms of your mortgage from converting the property to rental property. As a general rule, though, your lender cannot tell you what you can do with your property.

The bank’s interest in the home only becomes relevant if you stop making payments on the home, if you file for bankruptcy, or if you decide to sell your property:

  • If you attempt to sell your home, the buyer cannot take clear title unless the lien that your bank holds is satisfied. To satisfy the lien, you must typically pay the full principal balance remaining on the loan.
  • If you file for bankruptcy, your lender must be listed as a creditor in the bankruptcy filing. A bankruptcy filing will allow you to ‘walk away’ from the home and forgive your personal debt to the lender. However, if you want to keep your home, you will need to continue to make payments to the lender. If you stop making payments on a mortgage, the bank cannot simply take possession of your home, as they could if they truly owned it. Instead, they must go through the foreclosure process, and must prove that their lien on your home is legitimate.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.