Mortgage debt in America continues to climb to record highs, amounting to over $13.5 trillion by the end of 2018. Housing debt in the United States is currently $869 billion higher than 2008’s $12.68 trillion total, just before the housing market crashed over a decade ago. It is also 21% higher than the debt from mortgage loans seen in the wake of the recession in 2013. Despite rising interest rates, many Americans are still eager to purchase a new property on borrowed capital.
Mortgage Debt Key Statistics
- Mortgage debt has climbed for 15 consecutive quarters, with $63 billion being accrued in the last quarter of 2018 alone.
- The average credit score of consumers who purchased a new home with the help of a mortgage loan rose from 755 to 760 in the initial quarter of 2018.
- Mortgage originations (new mortgages & refinances) dropped from $450 billion to $430 billion in the 4th quarter of 2018, perhaps due to the reduced need for houses that often accompanies the fall & winter seasons and possibly due to rising interest rates.
- The amount of mortgage debt owed by the average borrower stood at $201,000 by the last quarter of 2018.
- Mortgages have the lowest rate of delinquency rate of any type of housing loan after home-equity debt, with just over 1% of mortgage loans being more than 90 days overdue at the end of 2017.
- 60-day mortgage misbehavior rates have gone down from 7.21% in the first quarter of 2010 to a low of 1.83% in the 4th quarter of 2017. Due to falling housing prices, strong employment, and rising household income, the rate of mortgage misbehavior may even drop below their 2005 low of 1.65%.
- Out of all the different types of housing debt, mortgage loans comprise nearly 72% of the total sum.
- Average interest rates for mortgage loans are on the rise in 2019. Rates for 30-year fixed mortgages rose from 3.8% to 4.4% in 2018, with 4.5% being the new average in early 2019.
Implications of Rising Interest Rates for Mortgage Loans
Are rising interest rates for mortgage loans a sign of positive movement in the American economy, or does it indicate that homeowners are exhausting themselves as we head toward another real estate crisis?
Financial experts believe that the need for housing will continue to remain strong, but also that home buyers will have trouble with the limited supply of entry-level housing, thanks to climbing rates of interest as well as the high cost of moving into a more expensive property. Entry-level housing is limited because numerous existing property owners have low-interest mortgages that they don’t intend to leave, and, on top of that, they might not have the ability to afford the costlier real estate properties of today’s market.
Household debt has been expanding for over five years in a row, but the total sum of home loan debt has grown at a relatively slow rate since 2013. Overall, this seems to indicate a positive recuperation in the housing market.
Options for Mortgage Debt Relief
If you like your home, but you’re fighting to keep up with the costs, you may want to seriously consider refinancing your mortgage. Other than refinancing, there are a few other options which include:
- Take out a second mortgage. If your first home mortgage turns out to be more than you could handle, then taking out a second mortgage may be an option for saving your home.
- Nonjudicial foreclosure. In contrast to a normal foreclosure where ownership of the property is lost and the bank or lending financial institution can pursue you for any kind of loss when the home is resold, a nonjudicial repossession allows the lending institution to sell the property at public auction. The cash gained from the sale is used to settle debts from the mortgage loan and any shortage from the deal is forgiven. This type of financial arrangement has to be authorized by the loan provider and a guarantee that the house will be kept in good condition throughout the duration of the process.
- Deed-in-lieu of foreclosure. This form of debt relief involves handing over the keys to the house and walking away. As opposed to forcing the company who gave you the loan to undergo the time-consuming process of a foreclosure, you willingly leave your property while authorizing it over to the lender. In light of avoiding the foreclosure process, the lender will often wipe your slate clean of any debt related to the mortgage loan. If there is a shortage of demand for homes during this process, the lending institution may eat the cost, but they will also report this loss to the federal government, resulting in taxes that must be paid for by the individual whose mortgage debt was forgiven.
- Short sale. The lending financial institution agrees to approve the list price of your residence as repayment in full on your home mortgage, even in situations where the house value may be less than the sum of debt owed to repay the mortgage. In this scenario, the property goes on the market just as any other house would. The main difference is that the final decision on which offer is accepted is made by the lender and not the homeowner. Unfortunately, there are still taxes to be paid to the IRS when a mortgage debt is forgiven in such a manner.
Still uncertain of how to tackle your mortgage debt? Consult with those who gave you the loan and see what type of deal can be worked out. If that proves to be unsuccessful or too daunting of a task, you can always seek the help of debt counseling service or a debt settlement company. Experienced financial advisors may have some other useful suggestions that may not have been brought to the table yet.Get Help Now