Tuesday, 20 January 2015

Mortgage v/s selling property: All you want to know

Homeowners, even when there is a dire need, can’t think of mortgaging property and raising money against it. But is it only the emotional attachment that hinders people from taking a chance and stops them from pledging their property? No, it is basically the fear of losing the property which has been bought, in several cases, after sacrificing a lot of things.

While the fear is genuine in the wake of no information regarding mortgaging property, the dread can be overcome only by gathering more knowledge. A property can be another way generating money and utilizing it for essential purposes, if only you know how to make the most of it and deal with your fears.

It is not that mortgaging is always a better option than selling a home. Both have their own distinct advantages and disadvantages. Let us look at some differences between them.

1. In a mortgage, one does not have to forego the possession of the property and at the same time raise funds for whatever purpose required. The property owner can continue to use the property for his/her personal or business requirements. In selling, one will have to forego the possession of the property and cannot use it for any other purpose.

2. In a mortgage, the owner retains ownership of the property. In selling, the ownership transfers it to the buyer.

3. The amount of money that one can raise under mortgage would be a certain percentage (usually 70%-80%) of the value of the property. If you sell, you can realize the full value of the property.

4. In case of mortgage, the future capital appreciation on the property accrues to the present owner. In case of a sale, the buyer will benefit by the future capital appreciation.

There could be situations, when the owner of a property may not be able to get a loan because he/she may not have adequate income documents to justify a loan. So even with being an owner of a property, the owner cannot raise funds. In this situation the owner can sell the property if he or she is in dire need.

5. Mortgaged property can be rented or leased with permission of the financier, becoming another source of income.

So, the next time you require to generate money, your property can do that for you. You just need to check the details with your financier.

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