Here’s an interesting fact: according to the latest census stats, 29% of homeowners in California are living mortgage-free. That’s right, more than a quarter of all owner-occupied residences are free and clear, unencumbered by those pesky monthly mortgage payments. This is a pretty surprising statistic, given the frequently gloomy news about housing affordability in the Bay Area.
So what does this all mean?
Well, it means that for a lot of homeowners out there, they have some decisions to make. It’s important to weigh those options, as being a free-and-clear homeowner provides numerous opportunities.
For many people, it almost certainly was not easy to get into this position…home loans usually take decades to pay off, and there has been some incredible upheaval in the lending sector in the meantime. Weathering this storm has to feel incredibly rewarding, especially given the skyrocketing values of homes in the part few years. For others, the solution to free-and-clear ownership was simple: paying all-cash for the home from the start. A simple and elegant solution, to be sure, but one available only to a very limited number of buyers.
However they may have arrived there, being mortgage-free is certainly a relief for any buyer. It also means that they own outright a substantial form of wealth in the form of their home. The question is, what next? They can of course choose to remain in their home for as long as they like. Retaining their old property tax rate is a definite plus, the ability to save money each month due to the lack of a mortgage is certainly appealing, and besides, everyone needs a roof over their head, right? Once you’re living mortgage-free, why move at all?
However, the sheer value of a home means that ownership opens up a plethora of options for those thinking of maximizing their investment. If you’re comfortable with taking on a new loan, selling your home and not having to pay back a lender generates a huge amount of cash that can make purchasing the home of your dreams an attainable goal. For those looking to downsize, selling a free-and-clear home presents a tantalizing option: the possibility of buying a smaller home, or a home in another area, with all cash up front, and retaining the balance as money in the bank. In some situations, one could even turn their mortgage-free home into two homes: one a dwelling and one an investment property! Savvy buyers can transform an already fruitful investment into an even more profitable one.
Of course, these are not easy decisions to make. As with any real estate transaction, one must consider numerous complexities and calculations before making a decision. As a real estate professional, I am here to answer any questions you may have about this, and help you formulate a plan. I’ll be happy to consult with you to determine the best course of action for you, and how you can maximize your investment. You’ve worked hard to eliminate those mortgage payments…now is your chance to make that money work for you!
Of course, not everyone owns their home mortgage-free (at least, not yet…the percentage of free-and-clear homes has been going up every year). But even if you’re not quite there yet, it is a worthy goal to strive for. Finally reaching the goal of paying off your mortgage feels great…and it may be just the beginning of your real estate adventure!