According to the Census Bureau’s report (§963 Mortgage Characteristics – Owner Occupied Units), as of 2007 when the most recent data was available, the United States had 75,647,000 owner-occupied households. Of these, 24,885,000 had no mortgage. That is, not a single penny was owed the bank and the homeowner had total equity in the property.
That means 32.896% of owner-occupied households own their property outright and have no mortgage.
Now, these figures were from before the housing crisis but that shouldn’t matter because it seems like a good bet that if you owe nothing on your house, you can’t have the bank foreclose on it, can you? No matter what the market value of your home is, nobody can kick you out, as long as you pay your property taxes, which are often a fraction of the value of a residence.
To put that into perspective, imagine walking into a room of 100 homeowners that represents a cross-section of the United States. Statistically, 33 of the people in that room would have no mortgage. They would make no payment to the bank and they own their home outright. The other 67 people would have a mortgage.
[mainbodyad]What about the 50,762,000 households that had a mortgage? A vast majority had only a single mortgage (32,963,000 households), some had two mortgages (11,741,000 households), and a very small minority had three mortgages or more (847,000). Not all double mortgages are evidence of overspending. A McDonald’s franchisee that didn’t come from money and had to pledge everything he owned to get his first restaurant might fall into that category.
Of the folks with mortgages, it turns out 42,638,000 of these households, or nearly 84%, had plain-vanilla fixed-rate amortizing mortgages of the Leave it to Beaver variety.
There were 15,087,000 mortgage refinancing transactions that took place, of which only 2,209,000 households took cash out of the property. For those who took cash out of their refinance, the average amount received was $31,275. These were the men and women who used their houses as piggy banks.
What can we take from all of these figures?
- Most Americans are fairly smart. It is just a minority of people who are really, really stupid who put the system at risk and threatened to cause the total economic collapse.
- For people who own a home, 1 out of 3 owe no mortgage. It is impossible to go bankrupt if you don’t have any debt. I’m guessing these are the same 50% of Americans who have no credit card debt either because they don’t have a credit card or because they pay their balance off in full each month. Who says you can’t live debt-free?
It just goes to show you that if you live below your means, avoid liabilities, and build your ownership of good, quality cash-generating assets (which a home is not), the odds are in your favor.