If owning a home is the American dream, then owning your home “free and clear” of mortgage debt is the ultimate dreame-come-true.
Almost 21 million Americans, or 29.3 percent of homeowners, own their homes outright, without the burden of a mortgage, according to a new Zillow analysis of mortgage data.
To be exact, Zillow found that 20.6 million homeowners nationwide own their homes free and clear based on data through the third quarter of 2012. Remember that before you start to think about buying a house, it is important that you have the minimum credit score to secure a home loan to help with getting a mortgage.
Out of the nation’s 30 largest metro areas, these had the highest “free and clear” ownership rate: Pittsburgh (38.6 percent), Tampa (33.2 percent), New York (29.7 percent), Cleveland (29.4 percent) and Miami (28.9 percent).
This had the lowest rates: Washington, D.C. (15.5 percent), Atlanta (17.7 percent), Las Vegas (18.3 percent), Denver (18.5 percent) and Charlotte (20 percent).
A number of elements influence the percentage of free-and-clear homeowners in a given area, including median home values.
Zillow found that areas with lower home values generally have higher outright homeownership rates, as smaller loans for homeowners are easier to pay back more quickly. Once the loans have been paid off, the occupants now own the property.
Demographic factors including the age and credit rating of primary borrowers also affect free-and-clear homeownership rates.
Obviously, the longer someone owns a home, the longer they have to pay off their mortgage.
Zillow found that 65- to 74-year-olds are most likely to be free-and-clear (20.5 percent), followed by 74- to 84-year-olds (17.9 percent).
However, Zillow also found that 34.5 percent of 20- to 24-year-old homeowners are free of mortgages.
Among homeowners who own their homes outright, 44 percent have a high VantageScore – representing their credit rating – between 800 and 900.
Only 15.5 percent of homeowners with the highest credit rating of 900-990 are free-and-clear.
Zillow Chief Economist Dr. Stan Humphries said that examining homeowners who are free and clear is important for the housing market.
These homeowners unencumbered by a mortgage may be more flexible than indebted homeowners, “and therefore more apt or willing to list their homes or enter the market for a new property,” Humphries said.
“By determining where these homeowners are located, we can also gain insight into potential inventory and demand in those areas, as well,” he said.
Zillow’s analysis incorporates mortgage data from TransUnion, one of the big three credit bureaus.