Who Owns My House: Me or My Mortgage Lender?

The standard home buying process follows this formula: you find the right property, you go under contract to buy it, you get approved for a mortgage loan, the lender lends you enough money to buy the home, you sign papers, and you move into your new house. Since you were not able to pay for the property outright though, who technically “owns” the home, you or your mortgage lender?

The short answer is that you do. Your name will go on the title and the deed of the house. Your home serves as collateral on the loan, but you own it for most intents and purposes. You have the power to make decisions about the property including when and how to renovate, add on, decorate, paint, change the landscaping, etc. You also have complete control over when to sell your home. You also have the full responsibility to take care of the property in terms of repairs and maintenance. 

However, since you are obligated to repay the mortgage lender for the money that actually paid for your house upfront, the lender has a legal interest in your property, which means you do not have complete ownership until the loan is paid in full. You signed several documents at closing, finalizing this financial arrangement.  

In some states, buyers sign a mortgage note or promissory note. This is a legal agreement for a borrower to pay back your lender with interest over a period of time and it spells out the rights of both parties, including penalties if the borrower defaults on the loan.

In other states, a deed of trust is used. With this document there are three parties involved: you, the borrower, are the trustor, the trustee is the company or group that holds onto the title (typically the title company), and the beneficiary is your mortgage lender. These deeds of trust make it easier for lenders to foreclose if you default as they do not require judicial proceedings. The lender ceases to be the beneficiary once you pay off the loan in full and the title company will transfer the title to you at that point.

If you do not make your mortgage payments according to your loan agreement, your lender as an interested party, can start foreclosure proceedings on your home. Unless you can come up with the money and get back on track, the bank can eventually repossess your home even though you have ownership rights.

It is important to note that even if you own your home free and clear, by either paying cash or paying off your mortgage, there are still situations where you may be liable to lose your house. If you get behind on your property taxes, the government in most states has the right to take your house and sell it in a tax sale. Liens or other legal judgments against your property could end in a similar fate. 

In a general sense, when you buy a home, mortgage or not, you own the house and have practical rights to use it, change it, and sell it the way you want. Just remember that there are always financial obligations to third parties that could affect your ownership of the home.

Call us today - we can help you finance your next home or take out some of the equity in your current home.