Reflections

“The Home Is Not The Asset, The Mortgage Payer Is The Asset!”

Posted by on Apr 16, 2010 | 11 Comments

The people who like to provide us with doom and gloom have an interesting take on home ownership. They seem to feel that owning a home is not an asset and that the mortgage payee himself or herself  is the asset. This asset of course is to the bank that supplied the originally money to purchase the home and is the sole beneficiary of the owners toil to attempt to pay back the home loan. The homeowner also has the obligation to do the repairs on the home, pay property taxes for the home, and in general do the maintenance for the home during the mortgage period.

According to one article I read it stated that:

Smart investors know that homes are not assets; they’re liabilities. Assets generate income, homes deplete income. Ever notice how banks, upon foreclosure of a house, will quickly sell it? Banks don’t wait for homes to appreciate in value because of the expenses involved in maintenance. The home is not the asset, the mortgage payer is the asset! The revenue generated by mortgage interest is where the banks make their money. Banks and real estate agents have conned an entire generation into believing that their home is their number one investment. The more debt-slaves there are, the better off the leeches in the banking and real estate world will be. Really, have you ever wondered what “mortgage” means? It is a combination of two French words of “mort” (death) and “gage” (contract). So, you are essentially signing a death pledge or contract when taking a loan out for a house! It is total brainwashing.

WOW! I never looked at owning a home this way before. I have owned 5 homes in my life and I never even knew I was a bank slave! LOL But when one looks at the alternative, renting, I fail to see how owning a home is such a great disadvantage. Those rent receipts don’t offer anything except a windfall for the building owner. Mortgage and property tax payments are at least deductible to a certain point from your federal, and some state, income taxes. Up until recently values were increasing more rapidly than inflation and some folks were able to make a profit when they sold their homes.

What do you think?

Comments welcome.

Source

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  • D

    Have rented all my life & will continue to do so. The reasons for this are thus:

    1. You can never foretell the future.
    2. Have never lived in a neighborhood that I wanted to live for years.
    3. What if you can’t stand the neighbors?
    4. With the death of decent paying jobs…how can you afford to pay the mortgage?
    5. Look at #1.

    • http://wp3.lockergnome.com/nexus/blade/ Ron Schenone

      Thanks D for the comment.

  • http://thirdworldcounty.us David

    In five months, I will have owned 2 homes during my life. Oh, I’ve had more mortgages, but only my first home purchases and this one will have become genuine assets. The first home purchase was a steal. I was renting, and the owner approached me asking if I’d like to buy the place. He offered to apply the last few months’ rent toward purchase and do an owner-finance at a ridiculously low (at the time) interest rate on a very low price. Paid the thing off in 2 years and owned it outright (apart from the annual rent paid to the local government for the privilege of owning the place). A couple of years later, sold the thing for more than a few multiples of what I had in it.

    Since then, haven’t paid off a place until now (assuming I can make five more payments). Then this place becomes a genuine asset. Sure, in a few years it’ll need a new roof, and we have other things in mind to do for it, but ONLY as we have the cash to pay for them outright. I don’t intend to be a _bank’s_ asset again, as long as I can prevent it.

    “Can never foretell the future”–true, but the only “rent” I’ll be paying in five more months is the Danegeld paid to the government for the privilege of owning a piece of property, property insurance and just normal upkeep and repairs. Renters pay for the owners’ expenses such as insurance, repairs and taxes (those things are simply a part of the owners’ expenses and so are figured into what he has to charge for rent), so renters don’t get to forgo such things.

    “What if you can’t stand the neighbors?” Been there. Had the direct line to the sheriff’s department on speed dial. Outlasted the bad neighbors and now the head cashier at our bank owns the place next door–best neighbor we’ve had in years. Only neighbor we really don’t like (although he’s a “salt of the earth” good guy is because his lawn’s like a putting green. At least the prevalent breezes are away from his house so we don’t bug him with our beautiful dandelion crop (we love those things) every year. :-)

  • Bridgid Persephone Newman-Henson

    The article at this link indicates how the people as asset concept has been codified in law.
    http://home.earthlink.net/~walterk1/Patr/UCC/UCC1Arg.html

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  • YOGESH PAWAR

    my dad has some 4-5 homes on his name, but now suffering economic difficulties, but the positive thing is whenever we have some big (kind) trouble here we can shift to the other house

  • Dick

    Folks, let’s quit calling it a “Home” if it is nothing more than an investment. If it’s the place you shelter from the world, take your comfort, defend, then it’s “Home”. Otherwise it’s simply a house or Real Property.
    People pay off their Home loan and have a mortgage burning party. Children remember their childhood Home fondly. Home is about family life. It’s separate from investing. The rules of investing don’t apply. If it works out to be a good investment, fine. If it doesn’t, so what, you had to live somewhere didn’t you?

  • Cliffystones

    Dick,

    I agree completely. I grew up in the same house in downtown Los Angeles. My Mom lived there for over 30 years. My Dad never did want to “put shingles on someone else’s roof”. I want my children to have the same stability in their youth.

    I believe that Property Tax is even more Draconian than a mortgage, as you can never pay it off. At least you can pay a few hundred dollars more each month on a mortgage and be free of it in a more reasonable amount of time.

  • M. Free

    There’s no doubt that a home can be an investment, but that depends on your definition. It certainly can be an investment if you own it long enough and the economy continues to rise. I doubled my money on my first house in 7 years and put the proceeds down on my current home. I’ve been in it for 34 years and even in our down economy it’s worth at least 5 times what i paid for it. But that wasn’t my objective when I purchased either of my homes. I was providing a safe place that I could afford for my wife and children. Back to the investment perspective, I’ve been able to deduct the interest portion of my payments along with the property taxes on my Income Tax, and the remainder of the payment has gone into my equity. But, for people who bought a home as an investment and for no other reason, they were kidding themselves, especially in light of what’s going on in the foreclosure and short sale markets.

  • http://www.pprofiles.com/ Honolulu Real Estate

    We increase our assets by putting our money in savings accounts,or mutual funds. Rental property is another popular asset in which to invest, but it’s only an asset if the monthly income from rents, plus any tax advantages, is more than the monthly outlay for the property.