What is a 'Home Debtor'

Home debtor is an old-fashioned term for any individual who takes out a mortgage in order to buy a home and has yet to pay it off. Today, we typically don’t distinguish between homeowners and home debtors, and call everyone who holds a property deed a homeowner, regardless of how much equity they have in their home.


The term home debtor is particularly apt to describe those who will likely never be able to pay off their mortgage because of the costs associated with home ownership, such as property taxes, mortgage payments, insurance and necessary repairs. Unfortunately, millions of individuals fall into the category of home debtor, and with the high costs of owning a home, this term is often more appropriate than the commonly used word "homeowner." It is important for any person who is looking to buy a house to understand the underlying costs of the purchase and to ensure that they can afford to make the required payments.

According to Zillow Research, the typical American homeowner owes 62 percent of the value of their home, as of 2017, while a little more than one-third of all U.S. homeowners own their home free and clear. These people used to be home debtors, but now cannot be considered such, because they have paid off their mortgages. One’s degree of home indebtedness depends on many factors, such as the size of the mortgage initially taken out, how long one has been in repayment, and the state of the real estate market at the time of purchase. 

Home debtors who bought their home in the years before the 2006 highs in real estate prices, before the subsequent crash tend to face the highest levels of home indebtedness. Americans in the Generation X cohort were particularly hard hit, and therefore just 1.3 percent of mortgaged homeowners of that generation are close to escaping home debtor status. This level is similar to the millennial generation, even though Gen Xers have had more time to pay off their mortgages. 

Home Debtors and Underwater Homes

Home Debtors who owe more on their mortgage than their home will fetch on the open market are referred to as “underwater.’ The phenomenon of underwater home debtors became widespread in the aftermath of the bursting of the real estate bubble, when home values fell more than 33% nationally. As of 2017, more than 5 million American home debtors, or 10.4 percent of mortgaged homeowners nationwide, are underwater.

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