Free and Clear! Whatever Happened to Owning a Home Without A Mortgage?

When I first got my license in real estate in the late 1970's we had MLS real estate binders in Brooklyn New York.  The binders were always filled with leaflets of new listings, and old listings were taken out and placed in a separate section that denoted contract status.  Those that were sold were discarded.   The interesting thing back then showed type of owner's current financing.  I was surprised even then to see how many homes were listed as F/C or "Free and Clear!"  That meant no mortgage.  When folks paid off their mortgage they actually would hold a mortgage burning party!  That was a major achievement in life, and the goals of every homeowner.  Back then... a 30 year fixed rate mortgages were the norm.  20 - 30% down payment was normal, and no one really ever asked the seller to pay their closing costs.  The object back then was to build equity!  Pay down the principle however your could!  You could do it with tax return money, prepayment of principle by working every hour of overtime that came your way!  It all made sense.  It was money in the bank, and a nest egg for your family's future.  I would love to figure out what happened, and when credit that made no sense took over.  I guess some folks viewed it as the best way to get their was by using Other People's Money OPM as leverage.  Get the most for the least!

Owning a home was more than just owning it in name only.  Technically, the person that purchased something with nothing down would have been viewed as foolish, it would be even more foolish for a person to lend to them.  In that scenario, there is nothing to keep a person from walking away from their responsibilities when things got rough.  Bankers would have considered that type of loan pure risk!  Nothing down really means you are in name only an owner but have absolutely no equity but all the liability of the property.  That is not a very good situation to be in.  It's what the banks are now calling "De-leveraging!"  I call it walking away from personal responsibility!

As agents, we used to tell a first time home buyers about the value of paying off their mortgages early, and about pre-payment penalties.  They appreciated it, and used to send other referrals to us!  As an industry, we seemed to have stepped to the side on this advice.  I wonder if it was a smart thing?