Of course there are a host of other factors, like income level and spending patterns, contributing to someone's ability to become a millionaire, but according to Hogan's research, the average millionaire paid off their house in 11 years and 67% live in homes with paid-off mortgages.
Most have paid off their mortgages. In 2020, 58% of the state's equity millionaires owned their homes free and clear. Statewide, there has been a dramatic rise in the number of Californians who have paid off their mortgages, from 1.6 million households in 2000 to 2.4 million in 2020.
So, it should come as no surprise that homeowners put down roots here (literally and figuratively). Roughly 48 percent (47.9, to be exact) of all owner-occupied homes are mortgage-free.
Bottom line. Buying a home with cash can speed up the closing process and make your offer more appealing to sellers, which is a big plus in a hot seller's market. However, keep in mind that you're tying your money up in an illiquid asset, so it isn't always a good idea.
While mortgage rates are currently low, they're still higher than interest rates on most types of bonds—including municipal bonds. In this situation, you'd be better off paying down the mortgage. You prioritize peace of mind: Paying off a mortgage can create one less worry and increase flexibility in retirement.
You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says. “The reason I say 45 is the turning point, or in your 40s, is because think about a career: Most careers start in early 20s and end in the mid-60s,” O'Leary says.
Using one of these options to pay off your mortgage can give you a false sense of financial security. Unexpected expenses—such as medical costs, needed home repairs, or emergency travel—can destroy your financial standing if you don't have a cash reserve at the ready.
It's typically smarter to pay down your mortgage as much as possible at the very beginning of the loan to save yourself from paying more interest later. If you're somewhere near the later years of your mortgage, it may be more valuable to put your money into retirement accounts or other investments.
You'll pay lower closing costs when you buy a home with cash because you won't have additional closing costs or title insurance charges that come from a mortgage lender. Own your home outright. If you forego using loan funds and buy a home with cash, your home will be fully yours.
Chances are, if you want to buy a home when you don't have a job, you have a decent amount of money in the bank. If you pull together a large down payment amount and show you have savings to put towards future mortgage payments, the lender will feel a bit more at ease about lending money to you.
Some 38% of owner-occupied households in the U.S. are completely paid off, and mortgage-free homeownership is even higher among low-income families and in small cities with low housing costs, according to a new study by Construction Coverage, a Los Angeles-based construction content website.
Once your final payment is made, there are certain actions that the mortgage company and you should make to formalize this milestone. Receive mortgage documents: The mortgage company will send you a canceled promissory note, updated deed of trust and certificate of satisfaction.
The simple answer: They don't need loans. They need tax breaks, and they can get them by borrowing — at exceedingly low interest rates — off their mountains of assets. Take Elon Musk. In 2019, he took out $61 million in mortgages on five properties he owned in California.
The early payoff timeline works for mortgages under $1 million, Hogan said, but most millionaires don't have a mortgage that high. The average millionaire lives in a modest home, according to Hogan's research.
"The extensive list of celebrities that have mortgages on their properties is often surprising to people," Says Dallas-based mortgage lender Brian McCauley. "Actually, I would be willing to wager that most celebrities don't shell out cash for their properties."
Buying a house “with cash” can benefit both the buyer and the seller with a faster closing process than with a mortgage loan. Paying in cash also means no interest and can mean lower closing costs.
A cash offer is an all-cash bid, meaning a homebuyer wants to purchase the property without a mortgage loan or other financing. These offers are often more attractive to sellers, as they mean no buyer financing fall-through risk and, usually, a faster closing time.
Paying cash for a home eliminates the need to pay interest on the loan and any closing costs. "There are no mortgage origination fees, appraisal fees, or other fees charged by lenders to assess buyers," says Robert Semrad, JD, senior partner and founder of DebtStoppers Bankruptcy Law Firm, headquartered in Chicago.
It's also better to start saving for retirement early, so you can reap the benefits of compound interest over a longer period of time. As a general rule, the younger you are, the more you should prioritize your retirement savings over your mortgage.
It's often more beneficial for newer owners to be aggressive with their mortgage payments. This is because your money is typically going towards the interest on the loan, not the principal itself. This means that any extra payments will reduce the total amount of interest owed over the course of the entire loan.
Dave Ramsey is certainly one of America's leading voices on finance. Ramsey is averse to debt of any kind and believes you should pay off your mortgage as fast as you can. In fact, he recommends that people only take out a 15-year mortgage that is no more than ¼ of their take-home pay.
While you should steer clear of high-interest credit card debt, it's OK to use debt intentionally, including taking on a mortgage, using loans to pay for school or financing a car to get you to and from work. As for the ideal age to debt-free, don't get too caught up in the comparison game, says Sanborn Lawrence.
Paying off your mortgage early is a good way to free up monthly cashflow and pay less in interest. But you'll lose your mortgage interest tax deduction, and you'd probably earn more by investing instead. Before making your decision, consider how you would use the extra money each month.