You are trolling, right? If you own the house, you own the whole house, subject to the mortgage.
If you stop paying your mortgage, you’ll find out pretty quick who really owns your house.
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Okay, let’s say I’m Bill Gates.
I take out a loan of $125 billion dollars to buy AT&T, with the value of the shares being used as collateral for the loan. I then pay back one share’s worth of money as my first payment of the loan. I still own the entirety of AT&T, not just one share — the bank doesn’t get the dividends, or the voting rights. I still own the asset, but the bank is using it as security for the loan, and will repossess it if I default on my payments. My net change of equity by buying the shares is zero: for the loan worth $150bn, I got $150bn cash; for the $150bn cash, I got $150bn worth of stocks. I am not suddenly worth $150bn less by taking out a loan and buying those stocks.
And if you stop making car payments, ditto, but that equity article you posted says that the loan only counts once against that equity.
All you did was buy the bank AT&T for $150 billion with their own money, with a promise that you’ll slowly pay them to obtain full ownership of AT&T while you control the company. In this case your asset is one share of AT&T since that’s all you’ve actually paid into it and your liability is the remainder of the $150 billion you haven’t paid back yet.
It’s a terrible deal for the bank, if you ask me.
It’s like you got a mortgage for a $200k home and made no down payment, you didn’t just get $200k richer. You have no skin in the game. You haven’t actually paid any of your own money into that house: the bank is on the hook for it all.
Ownership is what really matters here and I’ll show you why:
Scenario A: You buy a $15k car. You need a $5k loan. You borrow $5k from me using your car as collateral. You can’t make the payments so you have to sell the car.
Your equity is $15k for the car - $5k for the loan, so $10k.
Since it’s your car, you have some say in whether you use a private sale or just go to a dealer for trade-in value, and you choose to sell it privately for the $15k it’s worth. You pay me $5k and keep $10k.
Scenario B: You want to buy a $15k car but you only have $10k. You ask me to cover the remaining $5k. I buy the car for you and you give me $10k as a down payment.
Your equity is $10k for the car - $5k for the loan, so $5k.
Since I hold title to the car, if you go bankrupt, I repossess the car. I only want my $5k back as soon as possible; I don’t really care about the rest. So I go to a dealer and get the trade-in value for the car of $10k. I keep $5k for the loan and give you the remaining $5k.
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That’s no teeny-weeny nuance when it comes to the 1% headline, is it? If even 10% of people in UK are under half-way through their mortgage their total net worth is zero under this methodology and the following is true:
“Cory Doctorow owns more than bottom 10% of the UK population”
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Oh, I agree (and for anyone other than Bill Gates, they probably wouldn’t even consider it). But that still doesn’t grant the bank the control over or the dividends from the shares.
That $10K figure for the sale of the car, a number very convenient for the argument you are trying to make, came out of nowhere. The bank could just have easily found a place to take the car off their hands for $12K, or sold it for parts for $5K. I don’t see how that $10K number relates to reality. The amount of money left on the loan bears no relation whatsoever to the difference between the actual value and the sale value of the asset.
And are you saying that the bank can’t repossess and sell a car that is collateral on a car loan unless they possess the title? Because I thought that’s exactly what the word “collateral” meant in this context: that if you defaulted on the loan, they can take the property back in lieu of payment, and sue if you don’t sign over the title during the repossession.
ITT: why accounting is not as easy as it looks.
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I presume Cory chose the photo to depict “a grossly wealthy person”, in typical hyperbole, but it shows the Lord Mayor of London’s Show; the coach is state property, and I suspect everyone in view is a civic official or employee.
What about this person from the photograph?
He was a partner in PricewaterhouseCoopers before becoming Lord Mayor of London. He might not be in the 1% but I wouldn’t bet my money on it.
It also looks like having a private education is an unofficial requirement to being Lord Mayor of London.
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Fair point, though the headline still implies the photo shows his personal possessions and staff. 
Note the “Lord Mayor of London” is more like “Lord Mayor of the Square Mile composing the City of London”, which is basically just the financial district around the Tower of London, where you can’t throw a stone without hitting a privately-educated white male. In fact, hailing from Burnley, this guy is probably one of the few who actually works every once in a while, which might explain why he ended up where he did.
Fun fact: the square mile is one of the few places left in Western Europe where voting rights are actually granted to corporations in addition to (the very few and extremely rich) residents. Thankfully, the powers of their elective body is slowly waning. Who knows, maybe by the XXII century the City of London will reach 1945.
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Why?
You have $100 in the bank.
You owe $200 to the hospital.
Q: HOW WEALTHY ARE YOU? (Show your work.)
If you have a mortgage with a bank, where is the deed to the house located? Your files, or theirs?
wealth inequality is a terrible measure of prosperity/poverty. globally speaking poverty is decreasing and prosperity is increasing, despite a few recent financial hiccups globalisation is doing a pretty good job. there are certainly flaws and corruption in global capitalism, they need to be fixed; but we don’t need to get rid of the basic idea, because fundamentally it’s working far better than any other system we’ve ever come up with.
Tell that to the few thousand people living close to me who are reliant on food banks if they are to be able to afford the rent.
Workers self-management seems to be a better solution on all counts, unless the goal is for the fewest number of people possible to take as much money as they can.
Tell that to the few thousand people living close to me who are reliant on food banks if they are to be able to afford the rent.
unemployment has risen, and wages have stagnated/decreased in developed countries in recent years (as has the cost of living), though unemployment is going down again in most countries now, and wages are going back up (brexit could well put an end to that for Britain, but the rest of Europe would benefit from that - Ireland has already seen a 65% increase in financial services positions). but even at it’s lowest ebb, the modern western standard of living really is the pinnacle of human prosperity. comparing the bank/asset balances of the bottom 20% to the top 1% really doesn’t tell us anything of value about objective levels of prosperity.
I was speaking globally though, so while unemployment was rising in the west at times in the last ten years, the opposite was happening in the developing world. this wasn’t a coincidence, there was a capitalist-driven redistribution of wealth from developed countries to developing ones.
Workers self-management seems to be a better solution on all counts, unless the goal is for the fewest number of people possible to take as much money as they can.
Worker owned enterprises are completely compatible with capitalism of course, but there’s no evidence that such a system, when mandated as the only choice, would be successful, in fact all we have is evidence to the contrary.
I don’t see the relevance of the question.
If it’s merely a question of who holds the deed while the mortgage is being paid off, not of who actually owns the property, then I don’t see how the location of a piece of paper should affect the equity of the house.
On the other hand, if it’s a question of who owns the house while the mortgage is being paid off, then, once again, I only see two options:
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The bank owns the house, and you’re buying it from them on an installment plan. In this case, you own the percentage of the house you’ve paid for, and the “debt” of the mortgage isn’t debt at all, but merely the value of the house that you haven’t paid for yet. True, if the value of the house drops, you may have negative equity in the house when the amount you owe the bank exceeds the value of the asset, but as long as that doesn’t happen, you have positive equity in the house.
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You own the house, and the mortgage is a loan, with the house as an asset offered as collateral to secure the loan. Again, if the value of the loan exceeds the value of the house, you may have negative equity, but as long as that doesn’t happen, the house should be worth positive equity.
Put another way: if I win $100,000 cash (tax-free because I live in Canada) in the lottery, I have $100,000 more in equity than I did yesterday. If I use that $100,000 to pay off part of my mortgage, I lose the $100,000 in cash equity, and gain $100,000 (less fees) in equity by reducing my mortgage. I shouldn’t have a second $100,000 (less fees) in equity more than I did before winning the lottery. The value of the $100,000 in cash shouldn’t jump to $200,000 in equity because I use it to pay down the same amount in debt, or, if the bank owns the house, because I use it to buy that value’s worth of share of the house.
Or, from another view, if I only own the part of the house I’ve paid for, and have the mortgage as a separate liability, then the bank holds both the mortgage, as well as the part of the house that I don’t own, as two separate assets. That’s like saying that a ten-year-old car, worth $5,000, and its transmission, worth $2,000, are separate assets, and thus your total equity is $7,000, despite the fact that if you sell the transmission separately from the car, the value of the car will no longer be $5,000.
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Odd, Ix thought America has surpassed it’s national dad…
…yep, 1% owns 40%:
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The “bank owns the house” model is very close to Islamic banking, where you arrange for the bank to buy a house, then you buy it from them by paying in installments. There is a prohibition against taking interest, so instead there is a one-time fee for their work (that happens to be about as big as the interest would have worked out to) included in the price.
I believe the US and Norway use different approaches to loan collaterals, and the UK is probably nearer to Norway in this case. From what I’ve understood, when you take a loan to buy a house in the US, the bank does kind of own the house - which means that you could walk away from the deal and leave them with it, if the interest became unmanageable or the future value of the house dips too far below the size of the loan. Thus the abandoned houses after the housing crisis. Over here, I’m personally responsible for the loan, the fact that I’m using it for a house is just information they use to evaluate my future ability to pay.
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