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Collectively, Americans are carrying a lot of mortgage debt — $11.39 trillion as of the end of June 2022, according to the Federal Reserve Bank of New York. That’s an annual increase of $945 billion, reflecting the fact that home prices have gotten higher, and more Americans need to borrow more money to afford one.
Most common types of debt
Mortgage debt is the most common type of debt in America. In fact, of the $16.15 trillion of outstanding debt on Americans’ balance sheets, more than 70 percent of it is due to outstanding balances on their homes. Here’s a look at the other common reasons Americans are paying back loans:
- Student loans: $1.59 trillion
- Auto loans: $1.5 trillion
- Credit cards: $890 billion
- Home equity lines of credit (HELOCs): $320 billion
Average FICO scores for homeowners
If you’re thinking about applying for a home loan and taking on a new load of mortgage debt, it’s important to know a simple rule: The higher your FICO score, the lower your mortgage rate will be. While conventional lenders will accept credit scores as low as 620, borrowers with excellent credit scores (740 and above) are the ones that qualify for the lowest interest rates. By lowering your rate, you’ll lower the amount of interest you will pay on the debt in each payment and over the course of the entire loan.
Mortgage debt by generation
Americans generally begin taking on debt as young adults, taper off their pace of borrowing in middle age and work to pay off loans near or during retirement.
| Generation | Average mortgage debt |
|---|---|
| Source: State of Credit Report 2021, Experian | |
| Generation Z | $192,276 |
| Millennials | $255,527 |
| Generation X | $259,100 |
| Baby boomers | $198,203 |
| Silent Generation | $163,254 |
For each generation, this trend has taken place in tandem with mortgage rate fluctuations and home price appreciation, which has accelerated dramatically in recent years. In February 2012, the median existing-home price was $155,600, according to the National Association of Realtors. By the same time in 2017, the median was $228,200. By February 2022, it had surged to $357,300.
States with highest and lowest mortgage debt
These states had the highest average outstanding mortgage balance per borrower as of the end of 2021, according to Experian:
- California: $401,954
- Washington: $310,595
- Colorado: $300,654
- Massachusetts: $280,811
- Maryland: $266,378
In these states, borrowers are much closer to paying off their home loans:
- West Virginia: $120,306
- Indiana: $133,314
- Ohio: $133,653
- Mississippi: $132,875
- Kentucky: $138,117
How to decrease mortgage debt
Although a mortgage is considered good debt, cutting down mortgage debt can help you save significantly on interest, provide peace of mind or prioritize other financial goals. Here are some of the ways you can reduce the amount you owe on your mortgage:
- Buy a less expensive home: Simply put, the lower the price of the home, the less mortgage you’ll need to pay for it.
- Save more for a down payment: If you can afford to put down more money upfront on a home, you won’t need as big of a mortgage. Here are tips to save more for a down payment and tips to obtain down payment assistance.
- Shorten the loan term: If you’ve had your mortgage for a while and want to accelerate the payoff, you might consider refinancing to a shorter loan term, which could potentially lower your interest rate in addition to reducing the time you spend repaying it. With a shorter term, however, you’ll likely have higher monthly payments. Refinancing also comes with closing costs.
- Make extra principal payments: If you want to pay down your mortgage faster but don’t want to be locked into higher monthly payments with a shorter term, consider making extra principal payments. You can do this several ways, including with biweekly payments, which can add up to sizable savings over the life of a loan.
- Obtain a loan modification: If you’re experiencing financial hardship, you might be able to coordinate a loan modification with your lender, which adjusts the interest rate or term (or both) to help make your mortgage more manageable.
