Mortgage status presents the share of homeowners who have any form of debt where the property is used as collateral for repayment of said debt. These debts can include home equity loans (a one-time installment loan), multiple mortgages, contracts, and trust deeds. Understanding the portion of homeowners that outright own their homes can be useful for determining the cost of homeownership and the housing needs of the community.

Mortgages allow individuals and business to buy real estate through a loan, and their terms are typically at 15 or 30 years. Mortgages can be essential for homebuyers who are unable to purchase homes with cash. This is crucial when considering the fact that homeowners have continued to gain equity on their homes and build wealth compared to renters. Although there are disparities within homeowner groups, namely within lower-income and Black households, most owners have seen an equity increase of $100,000 over the last 10 years.

Having a paid off mortgage, whether it is done early or through the end of the loan term, is beneficial for long-term financial prospects. Potentially the most important of these aspects is security during unstable housing markets or economic downturns. Homeowners without a mortgage are at no risk of foreclosure since there is no loan or lien placed on their property. Paying off one’s mortgage also frees up capital to pay off other debts or pursue other financial ventures, such as investment.

Homeownership has historically been an effective way to build wealth. The wealth disparity between renters and homeowners is largely driven by housing wealth, which has been steadily increasing and further driving the two groups apart. Homeowners are also able to save more when compared to renters, and it can be presumed that homeowners without a mortgage may be able to save the most (compared to those with a mortgage).

Written by Caroline Ghanbary