Clear title means owning property without mortgages, loans, or liens, but payments like taxes, insurance, and rent may still be required. Owning a home without a mortgage may result in higher taxes, but mortgaging the property can increase its value. The value of a clear title is affected by the real estate market.
Many people look forward to the day when they no longer need to make house or car payments, and when they own their property for free and clear. Such property, when there are no mortgages, loans, or liens on the property yet, is called a good title or clear title. With clear title, you own your property outright, and only you, or anyone else who jointly owns the property with you, has a right to claim it.
It would be a mistake to assume that having a clear title doesn’t mean you won’t continue to make certain payments. For example, with a clear title to a car, you may be required to make annual car registration payments, and you may also be required to carry a minimum amount of car insurance. Owning a home or other property for free and clear doesn’t mean a state or federal agency doesn’t come asking for property taxes every year. If you don’t pay those taxes, the taxing agency can repossess your home.
Similarly, you may have clear title to property that is in a property that you do not own. You may own a mobile home but not the land it is on. This means that you must pay space rent each month to continue residing where you do. Failure to pay rent for the space can mean eviction from the land where your home is located.
Occasionally, people forget the income tax benefits of owing money on a home and not having clear title. When you are paying for a house in the United States, you can deduct the interest payments from your annual income. Once you have the house free and clean, you may find yourself in a higher tax bracket. On the other hand, without a mortgage payment to make each month, you may be able to pay a slightly higher tax rate.
Sometimes it makes sense, especially with title deeds, to mortgage the property to get a loan for part of its value. You will no longer have a good title, but using a new mortgage to improve your home can increase the value or sell your home in a stable housing market. The value in a good or rising housing market may exceed the amount of your investment, suggesting the benefits of taking out a new mortgage with a clear title.
The real estate market needs to be mentioned. A clear title means that you own your home only, but the value of the title is affected by current home prices and fluctuates. Clear titles on cars, unless they are rare or classic, tend to mean that the value of the car is steadily declining. Most cars decline in value based on age, mileage, and any wear and tear.
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