Just Over a Third of Homeowners Own Their Home Free and Clear. Here’s What Everyone Else Owes
The Federal Reserve just mapped out exactly where American homeowners stand with their mortgages, and the numbers reveal a sharper divide than most people expect between those still paying and those who are truly done.
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Paying off the house is still one of the clearest finish lines in American personal finance. The Federal Reserve’s latest Survey of Consumer Finances shows how few homeowners have actually passed it. The Fed’s report Changes in U.S. Family Finances from 2022 to 2025 found that 65.6% of families owned their principal residence in 2025, and about 42% still carried debt secured by that home. Putting the two figures together, the Fed concludes that “almost two-thirds of homeowners have home-secured debt, while just over one-third of homeowners own their home free of debt.”
That split has barely moved. The ownership rate was 66.1% in the 2022 survey, and 42.2% of families had home-secured debt. The change since then is in how much the mortgaged majority owes.
What the Typical Mortgaged Family Owes
For families with home-secured debt, the median balance rose 8% to $183,600, up from $170,200 in 2022. The Fed counts first mortgages, junior liens and home equity lines of credit against the primary residence, so this is the full amount borrowed against the house.
The mean rose 3% to $239,700, from $232,500. Here’s why the two numbers differ. The median is the borrower standing exactly in the middle of the line, with half owing more and half owing less. The mean adds up every balance and divides by the number of borrowers, so a relatively small group of very large loans on expensive homes pulls it up. If you want to know what a normal balance looks like, use the median.
Notice that the median grew faster than the mean, which means the increase came from ordinary borrowers rather than the top end. That fits a period the Fed describes as one of rising interest rates on household loans. Families who bought in those years took on bigger loans, and because early payments go mostly to interest, those balances shrink slowly.
Owners Still Hold Substantial Equity
Balances got bigger, but owners still have a lot of wealth in their homes. Median net housing value, which the Fed defines as the home’s value minus all debt secured by it, rose 5% to $230,000. The median owner’s home was worth $375,000.
There’s a catch, though. The Fed says equity growth from 2022 to 2025 was “much slower” than in earlier periods, when median net housing wealth grew at an average rate of 26% between surveys. Rising prices did most of the equity building for a while. Now that home values are going up more slowly, more of that work falls back on the monthly payment.
Where Your Balance Ranks
Comparing your own balance with the Fed’s benchmarks tells you which group you’re in:
- No home-secured debt: You’re among the just over one-third of owners who own their home outright.
- Under $183,600: You owe less than the typical mortgaged family.
- Between the median and $239,700: You owe more than the typical borrower but less than the average.
- Above $239,700: You owe more than the average.
Your balance alone doesn’t measure your overall financial health. The report doesn’t compare net worth between mortgage-free owners and owners with a mortgage. A big loan in a high-cost market can come with plenty of equity behind it.
Should You Pay It Off Before Retirement?
Owning your home free and clear matters most as retirement gets close. With no mortgage payment, you need less income from your savings and from Social Security. That can mean smaller withdrawals from retirement accounts and lower taxable income.
Paying early gives you a guaranteed return equal to your mortgage rate, plus peace of mind. The downside is liquidity. Extra money sent to the lender turns into home equity, and getting it back means selling, refinancing or borrowing. A retired person with a paid-off house and a thin emergency fund can end up house-rich and cash-poor.
Your rate decides a lot of this. If you locked in a low fixed rate, keeping cash in safe savings may pay more than extra principal payments. If you have a higher-rate loan or a variable-rate HELOC, extra payments do more good. Be careful about taking out large amounts from a 401(k) or IRA to clear the loan. Those withdrawals count as taxable income and can push you into a higher bracket.
If you’re among the mortgaged two-thirds, three steps help. First, compare your balance with the $183,600 median, and check whether your payoff date lands before or after your planned retirement. Second, build an emergency fund before you send extra principal. Third, if your loan rate is higher than what safe savings pay, focusing extra payments on the decade before retirement can get you mortgage-free on your own schedule.
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
