The Urban Institute has released a report reviewing data from 118 million homeowners and 127 million renters to help understand how mortgages relate to other consumer debts.
Laurie Goodman, director of the Housing Finance Policy Center, and Web Li, senior research associate, for the Urban Institute reviewed consumer credit and public property record data from last year and divided the information on property owners and renters, including three subgroups: current mortgage; mortgage within the past 16 years but not now; and without a mortgage in the past 16 years. They learned that consumers with a current or paid mortgage often have other forms of debt from auto loans, student loans and credit cards or debt in collections.
"Comparing Credit Profiles of American Renters and Owners” came to several conclusions, including:
- About 50% of homeowners and renters with a current mortgage have an auto loan and more than 80% of both groups have credit card debt or spend money using credit.
- Renters without any mortgage are younger and less likely to have current credit card debt but more likely than the other groups to have a debt in collection.
- Renters with a mortgage they paid for are similar in age to renters and owners with a current mortgage but have more debt issues. They have the second highest percent of debt in collections – 37%. Ninety six million renters have never had a mortgage and 42% of that group has debt in collections.
- Homeowners without a mortgage during the past 16 years, 23 million people, are on average 64-years-old, have low usage of auto loans, credit cards and even home equity lines of credit.
Overall the report revealed that the largest group of consumers, approximately 96 million people or 39% of the 245 million adults in the U.S., is made up of renters without a mortgage in the past 16 years. The second largest group includes 67 million people who are homeowners paying a mortgage. Twenty-eight million people are homeowners with a mortgage in the past 16 years that they paid off and 23 million people live in a home without a mortgage in the past 16 years, according to the report. Among renters, 19 million currently rent their home but have had a mortgage in the past 16 years and 12 million rent their current home and are paying rent on other property.
"Housing, whether rented or owned, is one of the largest expenditures for most consumers. Many homeowners have mortgages, although a surprising number have already paid off their mortgages and own their homes free and clear. In either case, the down payment necessary to obtain a mortgage is a big chunk of most households’ savings," according to Li and Goodman. “At the same time, consumers have many other financial needs: education, auto, and medical expenses, as well as saving for retirement.” The report is a second in a series on consumer debt. In an earlier report, Li and Goodman found that consumers’ debt patterns reflect their lifestyle changes as they get older. Auto and student loan debt are more common among younger borrowers, while mortgages are more common among borrowers in their thirties, forties and fifties. Home equity and credit card–only debt is more prevalent among older adults.