I do not own a home but I am just wondering how capital gains work on a house which is not completely owned by me?

For example if I bought a house for 100k and I did put 20%(20k) down to buy that house. So bank has ownership of rest of the 80% of house and I am on 30 years mortgage. Now, if the price of the house becomes 200k next year and I sell it

what portion of that extra 100k profit would I get since bank since owns a significant portion of the purchase price?

  • 3
    You get all the reward if it increases, because you don't get out of a mortgage if the price of the house goes down, so your risk. Also, on a primary residence there's a nice capital gains exemption, so wouldn't pay any tax on that either.
    – Hart CO
    Sep 10, 2017 at 4:37
  • 1
    Just FYI, the answer to this question would be different (and more along the lines of what you were thinking) if you owned 20% and your rich uncle owned the other 80% (instead of you taking out a mortgage for 80%).
    – TTT
    Sep 11, 2017 at 21:49

2 Answers 2


The bank does not own the house. They have a security interest -- if you don't pay them what they're owed, they can go to court to get an order to sell the house, and if you sell the house you have to pay them from the proceeds. Whatever is left over is yours.

In your example, if you still owe the bank 80k when you sell the house for 200k, you pay the bank 80k. The remaining 120k is yours. That's a huge profit on the 20k that you paid in the first place. That leverage is often a critical factor in commercial real estate investments: using somebody else's money can enhance your own profit.

  • 1
    Yes, the bank makes its profit from the interest you pay on the mortgage - and generally mortgages are fairly low risk investments, because if you don't pay, the bank can probably get its money back by selling the house. That's why you generally have to have PMI (private mortgage insurance) if your downpayment is less than 20% of the purchase price, and why the low-doc and 100% mortgages were a big factor in the '08 financial downturn.
    – jamesqf
    Sep 10, 2017 at 17:42

Assuming US, when you take the mortgage, the ownership is yours 100%. You have a loan that is 80% of the value of the house.

So when you sell the house, you get all the profit (or loss). In the example you get to keep 100K profit.

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