First you have to understand I am not an accountant so what may seem obvious to you could be rocket science to me.
Here goes. When a bank gives you a mortgage on say 50% of your property value does that mean they have effectively placed a charge on your house and can list 50% value on their balance sheet as an asset?
There is a reason for me asking this question but if I told you I would then have to shoot you.
Would appreciate some help on this as it would be useful information at the moment.
Thank you.
Replies (8)
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No
The asset is the mortgage they have advanced to you. The charge simply means it's more likely to be repaid.
i could give you an answer ...
.. but then I'd have to shoot you! Its a good job peter has taken the trouble to answer the question, and saved me the bother of shooting you.
To be pedantic
It is the home owner who gives the mortgage (the pledge of title to the property) to the bank. What the bank gives the home owner is a loan.
The bank's asset
Statement of the obvious, but what the bank can (and does) list as an asset is the outstanding balance of the debt due to them from their customer.
The bank will include this on its Balance Sheet as a debtor. (In accountant speak there is a debit balance on the customer's account in the bank's records when the customer owes money to the bank.)
David