The benefits of being on the title to one's home are many. The inherent risks associated with owning real estate are also in force. However, the benefits far outweigh the risks. Securing a position as an owner of real property is the most important consideration for anyone with the ability to be on a property title. Enjoying the "appreciation" (property value increase) and having leverage to receive or control disbursed funds upon property sale is valuable.
Ownership Equals Control
Ownership of real estate offers all the benefits of ownership of any asset (cars, businesses, investments). The classic business mantra is that "money follows equity" and equity equals ownership. Legal ownership of any asset is superior to control, possession or any other legal position. Ownership gives you the final right of decision over your assets--never more important than with real estate.
Risk
As an owner, you must evaluate the risks as well as the rewards of all your assets, particularly real estate, regardless of current economic realities. Along with the benefits of being on a property title, there comes the risk of loss should you become unable to pay your mortgage loan on time and as agreed. Even if one or more owners are not also makers of the mortgage loan, they must depend on the note signers to make all payments due or suffer the risk of legal action and/or foreclosure.
Equity Increases
Equity is the difference between the fair market value (FMV) of the property and any debt or liens recorded thereon. For example, if your home has an FMV of $225,000 and has a mortgage lien of $150,000, your equity in the home is $75,000. If the next time an FMV is calculated (usually through a formal appraisal) the FMV is $250,000, your equity increases. Assuming you don't do any new borrowing using that equity, you now have $100,000 in equity. Should you sell the home, you would receive $100,000 cash (after paying off the mortgage loan) at the closing.
Tax Deferred or Tax Free Asset Values
As the FMV of a home increases, you are not subject to any damaging tax consequences. For example, if the property FMV increases from $150,000 to $200,000, you enjoy a $50,000 increase in asset value. Yet, no income taxes are due while you retain ownership. If your home is an owner-occupied, primary residence, when you sell it you may have no tax consequences if you invest all of the proceeds in a new residence. Value gains may then become tax free. Always verify these issues with an experienced tax adviser before acting on any assumptions.
