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1-in-5 California homeowners live mortgage-free

If living without a house payment is your dream, one-in-five Californians are living it already.

A report from Construction Coverage, a building industry information service, shows 20.1% of California owners don’t have a mortgage. Nationally, 26.4% of owners are mortgage-free. Only five states had fewer: Maryland, lowest at 16.6% then Massachusetts (19.2%), Utah (19.3%), Rhode Island (19.6%) and Colorado (19.7%).

These mortgage-free owners often can ignore certain slices of the economic debate. Take this pandemic turmoil, for example. They’re obviously immune to interest rate swings, so cheap money doesn’t impact them. (Unless they choose to do a cash-out refinancing!) They can’t lose their home to the bank if unemployment is high. (Though, property taxes still must be paid!)

And when various indexes or studies show a tiny fraction of Californians cannot “afford” a home, remember that 20% already own one — without a mortgage!

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Mortgage-free owners are quite different than folks who borrow. Let’s look at what Construction Coverage found in California compared with the typical American homeowner.

They’re wealthier. You obviously need a decent paycheck to buy. California’s median household income goes from $81,000 for loan-free owners to $121,500 for those with a mortgage. Nationally? $66,000 (no loan) vs. $99,900 (loan).

Pricier homes. Mortgages allow people to pay more. In California, the median home value is $450,000 for owners with no mortgage vs. $535,000 for the mortgaged crowd. Nationally? $170,000 (no loan) vs. $250,000 (loan).

Higher spending. This adds up to bigger median monthly housing costs for borrowers: $653 (no mortgage) vs. $2,454 (mortgaged) in California. Nationally? $508 (no loan) vs. $1,610 (loan).

Larger chunk to shelter. Look at housing costs as a share of income. For the mortgaged crowd, Californias put 23.7% of income toward housing vs. 19.7% nationally. But for the free-and-clear owners, they’re actually doing better in California: spending 8.8% of income on housing vs. 9% across the U.S.

Source: Orange County Register

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