{"id":185581,"date":"2025-11-10T13:06:13","date_gmt":"2025-11-10T20:06:13","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=185581"},"modified":"2025-11-10T13:07:02","modified_gmt":"2025-11-10T20:07:02","slug":"40-percent-of-homes-are-mortgage-free","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/40-percent-of-homes-are-mortgage-free","title":{"rendered":"Mortgage-Free America? Why Homes Today are Equity Rich and What It Means For Investors"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Americans are tired of worrying about inter<\/span><span data-preserver-spaces=\"true\">est rates. That could help explain why over 40% of American homeowners are mortgage-free\u2014the highest figure on record, according to<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.resiclubanalytics.com\/p\/share-mortgagefree-us-homeowners-just-hit-new-alltime-highheres\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\"> ResiClub\u2019s analysis of census data<\/span><\/a><span data-preserver-spaces=\"true\">, as reported in the<\/span> <em><a class=\"editor-rtfLink\" href=\"https:\/\/nypost.com\/2025\/10\/30\/real-estate\/more-than-40-of-us-homeowners-dont-have-mortgages\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">New York Post<\/span><\/a><\/em><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">However, it\u2019s not a strategic investment strategy. <\/span><span data-preserver-spaces=\"true\">Rather<\/span><span data-preserver-spaces=\"true\">, it\u2019s because Americans are getting older and have gradually paid down their 30-year loans.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Despite that, the growing number of paid-off homes could have far-reaching ramifications for the housing industry, including real estate investors.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Mortgage-Free America: The New Reality<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As the baby boomer generation nears retirement, many have paid off their primary mortgages or sold larger homes and bought smaller ones for cash. ResiClub notes that 54% of mortgage-free homeowners are aged 65 and older.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The greatest concentration of mortgage-free homes is in the South and Midwest, where median ages are higher. In Texas, 61.8% of McAllen, 57.8% of Brownsville, and 57.1% of Beaumont residents have paid their last home loan installment.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The opposite is true in fast-growing cities with younger demographics, which have the smallest number of free-and-clear residents, such as:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Washington D.C.:<\/span><\/strong><span data-preserver-spaces=\"true\"> 26.4%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Provo, Utah:<\/span><\/strong><span data-preserver-spaces=\"true\"> 27%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Denver, Colorado:<\/span><\/strong><span data-preserver-spaces=\"true\"> 27.1%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Greeley, Colorado: <\/span><\/strong><span data-preserver-spaces=\"true\">27.2%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Ogden, Utah:<\/span><\/strong><span data-preserver-spaces=\"true\"> 28.8%<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Why This Trend Matters for Real Estate Investors<\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The downside<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Communities with large numbers of paid-off properties and homeowners happy to stay in place <\/span><span data-preserver-spaces=\"true\">translates<\/span><span data-preserver-spaces=\"true\"> to less overall mobility, fewer motivated sellers, and less property churn. In short, it\u2019s a bad place to buy deals, for both <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/guides\/how-to-flip-houses\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">flippers<\/span><\/a><span data-preserver-spaces=\"true\"> and landlords.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">According to<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/home-turnover-report-2025\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\"> Redfin<\/span><\/a><span data-preserver-spaces=\"true\">, U.S. property turnover is at an all-time low, with only 28 of every 1,000 homes selling in the first nine months of 2025. High mortgage rates have not encouraged older homeowners to part with their most prized asset and trade or invest for <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/rental-property-cash-flow-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cash flow<\/span><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cAmerica\u2019s housing market is defined right now by caution,\u201d said Chen Zhao, Redfin\u2019s head of economics research, in a press release. \u201cMany sellers are staying put\u2014either because they\u2019re locked into low rates, or unwilling to accept offers below expectations. When both sides hesitate, sales naturally fall to historic lows.\u201d<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The upside<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Homeownership is increasingly problematic as residents age. Aside from non-mortgage-related costs such as taxes, insurance, and utilities, maintenance can be prohibitively expensive, especially in older homes.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">It presents a golden opportunity for homeowners to leverage their <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-home-equity\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">equity<\/span><\/a><span data-preserver-spaces=\"true\">, either through a sale, reverse mortgage, or by having a third party rent and manage their primary residence. Meanwhile, they can use the cash flow to move into a rental community or an elder care facility, where they no longer have to deal with the stress of keeping up a home.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How much cash is available?<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Given the geographic location of many of the paid-off properties and the age of the homeowners, it\u2019s safe to assume that most of the homes are not McMansions. According to <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bankrate.com\/home-equity\/homeowner-equity-data-and-statistics\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">property data analyst Cotality<\/span><\/a><span data-preserver-spaces=\"true\">, U.S. homeowners with mortgages have about $302,000 in equity as of Q1 2025. Roughly $195,000 of that is considered \u201ctappable\u201d\u2014available for withdrawal while maintaining at least 20% equity in the home\u2014which isn\u2019t much where investing is concerned.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Most data and analytics sites quote the total amount of equity available, combining this for homes with and without mortgages. <\/span><span data-preserver-spaces=\"true\">The<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/mortgagetech.ice.com\/publicdocs\/mortgage\/march-2025-mortgage-monitor-report.pdf\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\"> Intercontinental Exchange (ICE) Mortgage Monitor report<\/span><\/a> <span data-preserver-spaces=\"true\">puts the<\/span><span data-preserver-spaces=\"true\"> average <\/span><span data-preserver-spaces=\"true\">amount of<\/span><span data-preserver-spaces=\"true\"> home equity <\/span><span data-preserver-spaces=\"true\">at<\/span><span data-preserver-spaces=\"true\"> $313,000 as of March 2025.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Low-Risk Strategies to Leverage Equity in a Paid-Off Home<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Depending on a homeowner\u2019s age and risk tolerance, there are several ways to use the equity in a fully paid-off mortgage.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The fact that the mortgage <\/span><span data-preserver-spaces=\"true\">is paid off<\/span><span data-preserver-spaces=\"true\"> and not already leveraged with a HELOC often indicates the homeowner&#8217;s profile. Leveraging is not something that sits comfortably with them. <\/span><span data-preserver-spaces=\"true\">So, using<\/span><span data-preserver-spaces=\"true\"> the money to make money in the short term and then returning the cash to a line of credit to be used again is likely the most suitable course of action.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Here are a few ways owners can make their money work for them\u2014without causing sleepless nights.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Become a hard money <\/span><span data-preserver-spaces=\"true\">lender<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Lending money to other investors to flip homes and occupying a first lien position, with a deed <\/span><span data-preserver-spaces=\"true\">in lieu of<\/span><span data-preserver-spaces=\"true\"> foreclosure to protect your position, is a <\/span><span data-preserver-spaces=\"true\">fairly<\/span><span data-preserver-spaces=\"true\"> fail-safe move, provided you have done your due diligence on the home you are lending on and the people borrowing your money.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Invest in a vacation <\/span><span data-preserver-spaces=\"true\">property<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> is a slightly riskier move. Buying a second home for cash by taking out a <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-a-heloc\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">HELOC<\/span><\/a><span data-preserver-spaces=\"true\"> on your primary residence at a lower rate than current mortgage rates allows you to enjoy having a vacation home to visit and also rent out via <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/short-term-rental-investing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">short-term rental<\/span><\/a><span data-preserver-spaces=\"true\"> sites. The rental should cover the cost of the additional loan or more, while offering tax breaks and equity appreciation.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Flip houses<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you have the inclination and know-how, using your cash to flip homes means sidestepping hard-money lenders. In fact, you can be the hard money lender and pay your company a higher interest rate for borrowing your home\u2019s money, closing fast with an all-cash offer. Once the house <\/span><span data-preserver-spaces=\"true\">is sold<\/span><span data-preserver-spaces=\"true\">, the proceeds <\/span><span data-preserver-spaces=\"true\">return<\/span><span data-preserver-spaces=\"true\"> to you.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Add an ADU to your primary residence for extra <\/span><span data-preserver-spaces=\"true\">income<\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Adding an <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/accessory-dwelling-units-explained\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">ADU<\/span><\/a><span data-preserver-spaces=\"true\"> to your primary residence involves taking on additional debt, but the cash flow from the new dwelling should help pay it off quickly. Management and maintenance <\/span><span data-preserver-spaces=\"true\">is<\/span><span data-preserver-spaces=\"true\"> easy because you are always nearby. Conversely, living in your ADU and renting out your primary residence will enable you to pay off the additional loan more quickly.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">In the current economic climate, with rising food, energy, and insurance costs, paying off a mortgage <\/span><span data-preserver-spaces=\"true\">takes<\/span><span data-preserver-spaces=\"true\"> a homeowner\u2019s most significant monthly cost <\/span><span data-preserver-spaces=\"true\">off the table<\/span><span data-preserver-spaces=\"true\">, so tapping into <\/span><span data-preserver-spaces=\"true\">the<\/span><span data-preserver-spaces=\"true\"> equity should not be taken lightly.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Using equity to make money in the short term with lower-risk investment strategies is advisable rather than buying a long-term rental and hoping the tenant pays on time, especially for older homeowners on a fixed income.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">For flippers especially, the high percentage of older homeowners with paid-off mortgages presents an opportunity. Many would be interested in giving up the rigors of maintaining a home in exchange for a fast closing and a fair all-cash price, allowing them to live out their final years in a low-stress setting.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Americans are tired of worrying about interest rates. That could help explain why over 40% of American homeowners are mortgage-free\u2014the highest figure on record, according to ResiClub\u2019s analysis of census [&hellip;]<\/p>\n","protected":false},"author":613725,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-185581","post","type-post","status-publish","format-standard","hentry","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185581","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=185581"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185581\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=185581"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=185581"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=185581"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}