Bare ownership is one of those concepts that you don't notice until you're actually there. It arises at specific times, such as when you inherit part of a house, you're looking for a home to buy and you see offers where the ownership of the house is for sale, but not its use, or when you're thinking about how to get the most out of your home once you've retired, for example.
Getting ahead of these moments and knowing what bare ownership entails can help you improve your options when buying a house, whether it is for your primary residence or as an investment to rent out .
What is bare ownership?
Bare ownership is the right of a person over something that he or she owns, but cannot use because that right is reserved for a third party, who has usufruct. Still not clear? Now you will better understand how bare ownership works.
When buying a house, a car or, in fact, anything, we are used to acquiring what is known as full ownership or full domain. In other words, that the property is ours and we can use it whenever we want. The reality is that these two rights can be divided between bare ownership and usufruct.
The first refers to the ownership of the home, that is, who owns the property.
The second refers to the right to use the house in its entirety.
The difference between bare ownership and usufruct lies in what each of these rights allows you to do. For example, the usufructuary of the house may use the house, rent it out and even sell the usufruct of the house for as long as he or she has it.
For his part, the bare owner will not be able to do anything with the house other than sell the bare ownership. Only when the usufruct expires will he have full ownership of the house and will he be able to do whatever he wants with it. And when does the usufruct end? Well, that depends on the type of usufruct that has been signed. If it is for life, when the usufructuary dies and if it is temporary, when the stipulated time has passed.
Two examples: an inheritance and a partial sale
Bare ownership and usufruct are common in inheritance cases. When one of the parents dies, it is normal for the bare ownership of the family home (or part of it) to pass to the children, leaving the usufruct to the surviving spouse.
To give an example, to make it easier to understand, if the father dies, the mother will have usufruct of the house (normally for life) and the children will have bare ownership of the house. This is how the parents ensure that the other person will be able to keep the house, even if it is not theirs.
Another increasingly common case is that of people who want to make the most of their home without having to stop living there. Think of a retired person who wants to supplement their pension and only has their home to do so. What can they do to turn it into money without having to sell it?
You could rent out part of the house, such as the rooms you don't use. And what if you want to continue living alone or not share your house with strangers? Then there are two alternatives: take out a reverse mortgage or sell the bare ownership of the house, but reserve the usufruct for life.
In other words, no longer owning the house, but being able to live in it (and even rent it out if you wanted to).
Can you buy only the bare ownership of a home?
If you can sell the bare ownership of a home, it is because you can also buy it. It is an option that is not normally considered until you find it when looking for a home.
What are the advantages of buying the bare ownership of the property and not the full ownership? The big advantage is the price. You can get significant discounts on the market price of the property if you only buy the bare ownership. Specifically, you will buy between 30% and 50% cheaper. The discount will depend on the conditions of the usufruct or whether, for example, a rental is agreed or not.
In exchange, you will have to wait to be able to use the house.
This may be a good option to buy a second-hand house .
If you have time, you don't mind waiting and you value the price more than anything else, it is important to leave everything well tied up in the sales contract.
Can you request a mortgage for bare ownership?
One of the most common questions when buying the bare ownership of a house is what happens with the financing. Do the entities grant mortgages to buy the bare ownership of the house? The answer is affirmative. The bare ownership can be mortgaged, but not the usufruct (remember that the usufructuary is not the owner of the house).
There are mortgage loans for the partial purchase of a home . The difference with a conventional mortgage is that the loan only affects the bare ownership and this can be reflected in the appraisal value of the home in the mortgage .
In any case, mortgages on bare ownership are not an exceptional transaction. This type of purchase and sale has been growing at a rate of 52% in recent years, so financial institutions have become accustomed to covering this type of situation.
In short, if you find an opportunity to buy bare ownership of a home, either as your primary residence or as a long-term investment, you can find a mortgage to finance it.