Who owns their home (with no mortgage)?

[TSR Capital]

If you do, then you are in the minority.

Think about this incredible statistic: Of households run by near-retirement age people (age 60 average) with a household income of $150,000 - $200,000, only 16% own a home with no mortgage.  That surprised me.

Median home equity: $202,000
Median home value:  $370,000

Again, that's for the same very affluent group.  This study breaks out the stats for other income brackets.  It also has a bunch of other statistics about those nearing retirement.

http://www.ici.org/pdf/ppr_12_success_retirement.pdf

I don't personally own a home.  Some day, I may.  If I do, I intend to pay cash, no mortgage.

I live in a very affluent neighborhood (Chevy Chase/Bethesda, MD), and as I withdrew some money today at a bank, I noticed that I walked by an awful lot of bank branches.  It's been dawning on me that the people in these local $500 K - 1M+ homes don't really 'own' their own homes (no mortgage, all equity).  The banks do.

Count the bank branches on Wisconsin Avenue:
https://maps.google.com/maps?q=friendship+heights&ie=UTF-8&hq=&hnear=0x89b7c993f8d54295:0xd77ae8e84bdf7856,Friendship+Heights,+Washington,+DC&gl=us&ei=rym6Uea7INW14APC7oCADQ&ved=0CJcBELYD

[Insanity]

There is the ever changing argument - based on rates - that having a mortgage is a good thing.

For instance, rates are really low (in the US) and therefore the bank is lending you money cheaply.  You can do a lot better with the cash flow than having it sit in equity in your house.

Me personally - I'm all for having a mortgage right now.   

My spouse - not so much.

[Spork]

I don't personally own a home.  Some day, I may.  If I do, I intend to pay cash, no mortgage.

I did this.  It is do-able... but any time you step a little outside of the norm, you're going to have a few people resist.  (Builders, insurance agents, etc.)

[footenote]

I bought my current home for cash. I understand the debate about owning your home (vs having a mortgage) going into retirement.

On a pure numbers basis, I agree with arebelspy and many others who say the US govt is providing lovely leverage opportunities keeping interest rates low. But mortgages are very difficult to qualify for without income per se once you're retired. (Assets alone don't cut it.) And if circumstances require selling the home and you are underwater, you might have to pony up to get out.

It's sad that so few nearing retirement own their homes because few are savvy investors (like arebelspy) and home equity is the majority of most people's net worth. Yikes.

[Norman Johnson]

I do. I'm considering getting a mortgage and getting some of my equity out to invest elsewhere, but I am in no rush. We also talk about getting a house in a better location too, but again, I'm in no rush.

The decision was partly numbers (keep our monthy expenses lower) and partly emotional (WE'RE 30 AND OWN OUR HOUSE, WOO!!!)

[pbkmaine]

No mortgage here. House was paid off a year ago.

[rmac40]

We paid our house off 2 years ago.  No regrets at all!

[Bigote]

I own two at the moment. But one is in contract so I'll go down to one. (Neither is an investment property, I just legged into a move). 

[Praxis]

I own two houses cash at the moment, but am refinancing them to buy more.

[BlueMR2]

Me personally - I'm all for having a mortgage right now.   

My spouse - not so much.

The math can work for having a mortgage much of the time.  However, the mortgage can be a surprisingly large emotional drain.  I opted to cash out a CD (out of my low-risk portfolio, that I locked in at a long term, high interest rate right before the crash) when it came due, since it wasn't going to make much money anywhere low-risk post-crash anyways.  Of course, the mortgage rate was ridiculously low too.  I decided that using the Obamamoney (I bought when the second round, don't have to repay it deal was made available) and the CD money to buy the emotional freedom was worthwhile since I didn't have to pull from any of my higher risk stuff (that all lost 50% value).  In fact, was able to add to that at the same time and ride the wave when everything came back up!  :-)

I got supremely lucky with the timing on *everything* involved in that house purchase...  The crash came at an absolutely perfect time.  I had my money locked in to good rates, got a steal on a house, got the Obamamoney, the super low mortgage rate, and was still able to buy high risk investments on the cheap.  Of course, some of the luck was the years of planning beforehand to set myself up to be able to take advantage if/when the situation arose...

[frugalcoconut]

Paid off the mortgage on my primary residence last year so now I own it free & clear.

Refinanced the mortgage on my investment property (shorter term, lower rate) a couple of months ago with no immediate plans to accelerate balance reduction.

[Rural]

We paid ours off three weeks ago.

[SwordGuy]

Paid ours off 2 1/2 years ago.  It's great!

[aj_yooper]

We are retired, so no mortgage.  I have a small HELOC, but am paying that off quickly. 

[gooki]

No mortgage.

[MrsPete]

I found the report interesting . . . but I find it suspect. 

First, what is this "The US Retirement System" of which they speak?  I consider myself pretty well up-to-date on such topics, but I'm not aware of such a system.  I wondered if they were talking about Social Security, but as I read I realized that wasn't the case.  They begin the report by saying that people today are generally well-prepared for retirement and that the shift from employer-based retirement plans (pensions) to private planning (401Ks, etc.) will "increase retirement resources for most households".  Haven't we all seen multiple indications that this isn't true? 

I do like the comment that retirement should not be considered -- as in the past -- a three legged stool; rather, a better analogy is that of a pyramid with five parts:  Social Security; homeownership; employer-sponsored retirement plans (DB and DC); IRAs; and other assets.

I am concerned that the writers consider Social Security to be a person's strongest retirement resource.  Personally, I'm hoping to receive some Social Security, but I'm not banking on it. 

But, as for homeownership, I was surprised to see that the report says lower-income house holds are more likely to have a paid-for house as they approach retirement.  I assume this is because lower-income people tend to buy a moderate house and stay in it, while people with more wealth seem inclined to "move up" in the world by advancing into more expensive housing. 

As for me and my husband, we paid off our house almost a decade ago, and it was absolutely the right choice.  Yes, on paper the math might support the idea of investing that money in other avenues . . . but that's a situation that changes from month to month as interest rates fluctuate.  A house is an investment unlike any other:  It BOTH builds financial wealth, AND it provides you a place to sleep at night; thus, it should be a priority.  I totally agree with the previous poster who commented that it's an emotional item as well as an investment.  Especially for those of us who have lived in poverty, knowing that your house is YOURS is a powerful motivator. 

What we did makes perfect sense to me:
- Bought a starter house when we were first married -- it was less than we could've afforded, while allowed us to save an emergency fund and begin retirement savings. 
- Paid extra on the mortgage each and every month, and when we moved we had a good bit of that house paid off. 
- Moved to a larger, better-located . . . but not fancy-schmancy, expensive house . . . and stayed here.  Our second house has never carried a mortgage.

[andrea-stache]

Paid ours off in March!   

For us, it was all about peace of mind.  I get the arguments about deducting the interest and investing instead.   Personally, I like the fact that either my spouse or me could lose our job and we would be totally fine living off one income.

[Insanity]

Me personally - I'm all for having a mortgage right now.   

My spouse - not so much.

The math can work for having a mortgage much of the time.  However, the mortgage can be a surprisingly large emotional drain.  I opted to cash out a CD (out of my low-risk portfolio, that I locked in at a long term, high interest rate right before the crash) when it came due, since it wasn't going to make much money anywhere low-risk post-crash anyways.  Of course, the mortgage rate was ridiculously low too.  I decided that using the Obamamoney (I bought when the second round, don't have to repay it deal was made available) and the CD money to buy the emotional freedom was worthwhile since I didn't have to pull from any of my higher risk stuff (that all lost 50% value).  In fact, was able to add to that at the same time and ride the wave when everything came back up!  :-)

I got supremely lucky with the timing on *everything* involved in that house purchase...  The crash came at an absolutely perfect time.  I had my money locked in to good rates, got a steal on a house, got the Obamamoney, the super low mortgage rate, and was still able to buy high risk investments on the cheap.  Of course, some of the luck was the years of planning beforehand to set myself up to be able to take advantage if/when the situation arose...

That was impeccable timing!

I totally understand the reasons behind paying it off and the "emotional" lift of not having to dump a large portion of money out every month (you still have to pay taxes and optionally home owners insurance - which would seem crazy not to get).   

[BlueMR2]

I totally understand the reasons behind paying it off and the "emotional" lift of not having to dump a large portion of money out every month (you still have to pay taxes and optionally home owners insurance - which would seem crazy not to get).   

Taxes are big and ugly for everyone, but homeowner's insurance is dirt cheap (unless you live in a flood plain).

[Spork]

I totally understand the reasons behind paying it off and the "emotional" lift of not having to dump a large portion of money out every month (you still have to pay taxes and optionally home owners insurance - which would seem crazy not to get).   

Taxes are big and ugly for everyone, but homeowner's insurance is dirt cheap (unless you live in a flood plain).

Actually, even flood insurance is artificially low.

[DoubleDown]

Count me among the happily-has-a-mortgage crowd. I owns several homes, all with 20%-down-mortgages. I could pay them all off and be house rich and cash poor, plus missing out on all the great market returns I'm able to get by not sinking the money into the mortgages. I'm thrilled to be able to borrow money so cheaply, and let inflation and leverage work their magic, not to mention getting a great tax deduction in the process.

I suppose if I had several million dollars extra and nothing better to do with it, I might throw it at the mortgages. But even then, probably not.

For all you folks in the "pay off the mortgage camp", more power to you, but without doing the detailed math, I think I could safely say my net worth would be half or less of what it is had I followed that path.

[kelly1mm]

Just bought a cabin on 4 acres cash on Wednesday.  Our current 'main' home has a mortgage of about 60% of it's current value though.

[Spork]

For all you folks in the "pay off the mortgage camp", more power to you, but without doing the detailed math, I think I could safely say my net worth would be half or less of what it is had I followed that path.

I've said this in another thread, so if this seems like a repeat: it is.

The math surely works for loans at the current less-than-market rate.  I shall not argue that.

But there are other reasons to be mortgage free:
* ability to build at your own pace - You don't find this out until you try to do it, but: If you want to build your dream house, you have to build it to 100% and you have to do it at a reasonable pace.  The builder is most likely taking out a higher interest builder loan and he wants to turn this around fast.  The bank won't let you finish half of it.  That's too risky for them (and you won't get a certificate of occupancy, even though it's fully functional and fully built to code.).  If you build it for cash, you can do it piecemeal.  You can take your plan and divide it into reasonable chunks, building some of it part way and some of it fully finished.

In my case, I did all the paint, all the finish carpentry, all the tile, restored/installed some appliances and totally left the upstairs undone.  A bank wouldn't do this (or minimally wouldn't do this at the bargain basement interest rates.)  I am slow.  A normal builder wouldn't wait on me while his line of credit sits there asking for payments.  When I took the bank loan off the builder, he was more than willing to go away for a month while I did a job.
* more likely to build smaller - When you're sitting down bidding the plan out, it is so easy to get caught in that "but it's only $20 a month more" trap.  And those $20 a month add up.  It's not just the 3 car garage, it's the way you finish the kitchen, the floors, etc.  There is a snowball to this stuff.  And it is so easy to understand it's only a few hundred dollars a month more.  And that few hundred often comes with more property taxes, more maintenance, more to heat/cool, more, more, more.  Does this end up being more than you'll make if you invest?  I haven't put the math to it and it really depends on the person.  You may be able to resist the $100 a month more and I may not.
* psychological reasons - I think everyone understands these.  It feels like mine.  Corollary: after retirement, my monthly costs are lower.  There is always the ability to pull the equity out via HELOC/reverse mortgage/etc.
* I am sure there are more good reasons.  That doesn't mean that a mortgage isn't right for some people.  It wasn't right for me.

[Ozstache]

Yes, I effectively own my house outright, despite still having an active mortgage. The mortgage is linked to an offset savings account with a slightly higher balance than the mortgage, which means interest charged is $0. I am keeping the mortgage alive as it gives me a huge instant loan without any approval process should an investing opportunity present itself that is too good to pass up.

[earlyFI]

No mortgage, paid it off Dec 24, 2009. Worth it. Not having a mortgage has simplified my finances and allows me to save 75% of my income, will be FI in 2-3 yrs. I also have a renter, and the rent covers utilities, property tax, HOA fees, etc.

[waltertyree]

I refinanced my 30 year to a 15 year when the rates dropped a few years ago to keep the same monthly payment but drop the number of payments.

In only two more years, I'll be done and I don't anticipate having a mortgage ever again. Knowing that I won't owe that payment every month will free my mind.

[expatartist]

We own one free and clear, but don't live in it (now), just rent it out 3 seasons/year. It was a 90% emotional and 10% financial decision to buy. It's in Sicily, where we want to retire eventually, and where my family can spend their holidays. Probably won't retire in this particular house though, we'd like to be in a bigger town nearer the sea.

Purchase price was about US$10K, now worth double that, about what we put into it. The sweat and stress were free, hah.
Before and during initial renovations: http://www.flickr.com/photos/ebriel/sets/72157625971008339/
Now: http://www.flickr.com/photos/ebriel/sets/72157629641863617/

It wasn't the best decision financially but I bought it as our backup plan - if anything goes wrong wherever we are (b/c we don't live in our home countries), we can always live there. And we really enjoy the language and lifestyle in Sicily.

[Rollin]

I totally understand the reasons behind paying it off and the "emotional" lift of not having to dump a large portion of money out every month (you still have to pay taxes and optionally home owners insurance - which would seem crazy not to get).   

Taxes are big and ugly for everyone, but homeowner's insurance is dirt cheap (unless you live in a flood plain).

Or you live in Florida.

[BlueMR2]

Taxes are big and ugly for everyone, but homeowner's insurance is dirt cheap (unless you live in a flood plain).

Or you live in Florida.

No "or" necessary.  Florida is one big flood plain...  :-)

[Joet]

the bank still owns easy 40% of my primary residence so no, not even close. I also am not particularly interested in knocking that last 40% down more than absolutely necessary [30-fixed @ 3.375, which people here have told me to refi to a better rate rofl]

[Joet]

We own one free and clear, but don't live in it (now), just rent it out 3 seasons/year. It was a 90% emotional and 10% financial decision to buy. It's in Sicily, where we want to retire eventually, and where my family can spend their holidays. Probably won't retire in this particular house though, we'd like to be in a bigger town nearer the sea.

Purchase price was about US$10K, now worth double that, about what we put into it. The sweat and stress were free, hah.
Before and during initial renovations: http://www.flickr.com/photos/ebriel/sets/72157625971008339/
Now: http://www.flickr.com/photos/ebriel/sets/72157629641863617/

It wasn't the best decision financially but I bought it as our backup plan - if anything goes wrong wherever we are (b/c we don't live in our home countries), we can always live there. And we really enjoy the language and lifestyle in Sicily.

Awesome!!! Nothing like a $20k plan B! [that doesn't involve a helium punch out bag]http://gawker.com/nyc-couple-who-hosted-self-help-radio-show-found-dead-i-511482460

[John74]

I don't care about the math. I paid the mortgage off last year and love being debt free. The house represents only 10% of my assets, so I did not make myself cash poor by doing so.

[CeciliaW]

Paid ours off as soon as we could (about 7 years ago). Opened up a lot more choices when it lowered the 'enough' amount for each month.

[Mr Mark]

We have our safe long term bolthole all paid up, but in line with previous comments, this is a lot less than 10% of our stash.

Day to day, in where we live most of the time, we have a mortgage, because
A) it was cheaper to have the house as an owner than rent
B) had a great mortgage. Leverage!
C) it was a quality area, so should get tremendous capital gains, tax free as a personal residence. The market has gone crazy lately

So, do the math, and when things go cheap, buy quality. And 4% 30 year loans are a gift from heaven

[expatartist]

Awesome!!! Nothing like a $20k plan B! [that doesn't involve a helium punch out bag]http://gawker.com/nyc-couple-who-hosted-self-help-radio-show-found-dead-i-511482460

Those poor guys. And, uh, the neighbors who found them. [If I'd stayed in Brooklyn I would've ended up the same way ;)]

[AlexK]

I have 3 paid off properties, 2 are rentals and one I live in. They are cheap houses, about $50k each.

I don't have insurance on the house I live in because if it burned down, I could move into one of the others, or rent.  I believe the cost of insurance premiums is more than the risk I'm taking, and insurance companies obviously agree with me.

[makincaid]

I paid my house off early, and have no regrets.

My primary goal financial goals are to reduce my stress and simplify my life. Keeping the mortgage to possibly make an extra $2k per year in the stock market was not worth the extra stress and hassle to me. If that is an "emotional" decision, so be it.

[Zoe]

We are about to be putting 50% down on a property and will have the other half paid off by the end of the year. I am ecstatic about not having a mortgage or paying rent.

[OldAndInTheWay]

paid off my home last year. feels great. thought about refinancing at the these low mortgages rates and investing the money, but i like the peace of mind and my wife feels the same way. Plus I have negative taxable income so I don't need the tax deduction to keep my money away from the blood-sucking leaches in DC

[sheepstache]

I paid cash for my apartment and paid off my student loans early.  I regret it, which is mostly hindsight about how investments would have done instead.  However the regret is also at the realization that I made the decision emotionally and my lack of financial sophistication at the time.   

Now my spouse has just proposed an aggressive plan for paying off his student loans.  I wish I could, in a way, fix my mistake by counseling him against this.  However, at 5.3% it's higher interest than he would probably get with his risk-averse style, and certainly not the slam dunk rates that I had or could have had on the mortgage.  Plus, he's more likely to stick to an aggressive debt-repayment plan than an aggressive saving one.  I suspect, to get back on topic, that the forced savings part of a mortgage is good for a lot of people.

[Earlyretirement]

Count me amongst the happy ones that have no mortgage.   

[Debbie M]

Another mortgage-free person here (after about 16 years of having a mortgage).

It's sad that so many near-traditional-retirement-age folks have not paid off their house.  I feel quite sure that most of them are not using the freed-up cash flow to make better investments.  It's sickenly common to refinance a house to increase your current cash flow at the expense of your future cash flow (by cashing out on increased equity and extending the payoff time to 30 years again).  I don't think my parents' house will ever be paid off because my dad keeps doing this.

And as we learned from the housing crisis, even when we're not the ones being idiotic, we can still suffer.

I got a mortgage because I thought house prices were going up faster than my salary and so I would never be able to afford to pay cash and it would just get harder and harder to buy.  I turned out to be right about that--the value of my house tripled during the time that my salary doubled and there was no real crash here.

When I refinanced, it was to get a lower interest rate, reduce my mortgage insurance, and reduce the length (from 28 more years to 15)--so that made sense numerically.

But after the first two years (when I could cut three months off the end of my mortgage every month just by paying $730/mo instead of $630), I happily paid the minimum on my mortgage, knowing I could earn more in the market than I was paying in interest.  I turned out to be wrong about that.  The market was about the same when I paid off my house as when I first bought it, and my interest rate was quite a bit greater than zero (8.25% the first two years and 6.625 the other years--7% and 5.63% after the tax deduction).

I don't really care about the psychological freedom of not having house payments.  I'm not saving that much ($250/month each for two of us).  The advantages for me are 1) my evil lender (who bought the mortgage from my original lender) is no longer making money off of me and 2) there is one less way for something to go wrong and make me lose the house.  I can still lose it by screwing up my taxes, screwing up my insurance right before a disaster, or having it destroyed by something that is not covered by insurance (act of war, aliens, eaten by English ivy).

If taxes get too expensive, that should mean that it's valuable enough to sell for enough to afford to rent for a long while or to move someplace cheaper (if such a place exists).  Otherwise, I don't really feel peace of mind.

In sum, my favorite way to increase my cash flow was to reduce the total amount paid for the house.  I did a basically good job with that, though prepaying more instead of investing so much would have been better.  [On the other hand, it was very nice to max out my Roth IRA every year to minimize my future income taxes (which I still think can go nowhere but up, though I've already been wrong about that once!).]

[Tom Bradford]

We own our property outright and the comfort of knowing that no-one but no-one can take our home away from us is priceless.

The temptation to leverage it is always there but to my mind the worry of the risk involved - of the investment made with the loan not being sufficient to cover the mortgage repayments resulting in the loss of the said property - hugely outweighs the potential profit to be made, especially as we don't actually need the extra income.

Moreover having been following the appalling scandals relating to real-estate mortgages in the US - with the scam of the servicer fees, the looting via HAMP and re-financing shambles, the widespread documentation forgeing for MERS, the blatant fee-creaming by lenders such as the BoA, Wells Fargo etc. and even unmortgaged properties being forclosed on - I cannot imagine why anyone in the US (which I'm not, thank God) would go within a mile of any mortgage lender.

[Sofa King]

I will be in 3 1/2 years and can not wait!!!   

[Jon_Snow]

We tell people we are mortgage free - in reality, we keep a minimal mortgage that costs us $250 monthly - with rates this low (we will likely keep locking into 1 year terms of 2.5% until rates look like they might start to rise) we really can't bring ourselves to pay it off, though we have more than ample savings to do so. In Canada, there are a plethora of telecoms, REITS, and resource stocks that pay stable dividends of 5-7% - thats where our excess funds are going - and these will fund my early retirement next year at the ripe ol' age of 42. :)

[pdxcyn]

I do!  It was for peace of mind as well. Also I had never refinanced because I knew I was going to pay it off pretty quick (did it in 6 years), so with an interest rate of 5.625% I figured I wasn't likely to get that kind of return by investing during the recession. Besides now I have several hundred dollars every month that would have gone to payments freed up to invest.

[charles_roberts]

Of households run by near-retirement age people (age 60 average) with a household income of $150,000 - $200,000, only 16% own a home with no mortgage.  That surprised me.

Me too. My mother has 8 years left on her mortgage at the age of 49. I can't wait to tell her she's in the 16%- that will certainly make her Monday!