Survey: ¾ of Homeowners Say Mortgage Negatively Affects Ability to Save

Seventy-seven percent of U.S. mortgage holders say the size of their mortgage has a negative impact on their ability to save money for the future, according to a survey by Bankrate.com, New York.

The survey, conducted with YouGov Plc of nearly 4,000 adults, also found of those, 31% said it has a “major negative impact,” while 46% said the impact was “minor.”

Meanwhile, homeowners said they are more likely to have the equity in their home exceed their retirement savings.

The survey said mortgage holders whose efforts to save money for the future are most impacted by the size of their payment include 82% of Gen Xers (ages 40-55), 81% of parents with young children (ages 18 and under) and 78% of millennials (ages 24-39). Additionally, lower-income households (under $49,999) were more inclined to say the size of mortgage has a major negative impact on their ability to save than a minor one (44% vs. 36%).

“Big mortgage payments take a bite out of your monthly income but are also a major obstacle to saving for retirement, emergencies, or other financial goals,” said Greg McBride, Bankrate.com chief financial analyst. “Homebuyers should beware of biting off more than they can comfortably chew and locking themselves into payments that make it difficult to save.”

The survey said nearly two in five (39%) homeowners say the equity in their home is higher than their retirement savings accounts (including 401k or IRA), while 28% say the balance in their retirement accounts exceeds their home equity. Thirty-eight percent of those who own their home outright have more equity in their home than funds in their retirement accounts, and 28% of outright homeowners say their total retirement balance is higher. Only 12% say their home equity is equal to their retirement balance.

Between 18%-22% of every generation of homeowners (aside from Gen Z) do not know whether they have more money in home equity or their retirement accounts. Women, lower earners and those with less education are more likely to be unsure of which balance is higher.

“One in five homeowners don’t know whether their retirement account balance is more or less than what they have in home equity, a possible disconnect to their own finances,” McBride said.

The survey noted home equity exceeds retirement account balances among every age group, but the gap narrows over time. Twice as many millennial homeowners have more home equity than retirement savings (46% vs 23%); the difference is much smaller among Boomers (ages 56-74), with 37% having more home equity and 33% having a larger retirement account balance. It also reported the likelihood for retirement account balances to exceed home equity increases with income and education. Higher-income households ($80,000 and over) are most likely to have a higher retirement balance than home equity (44% retirement vs. 34% home equity) as well as those with post-graduate degrees (49% vs. 32%). 

The survey can be accessed at https://www.bankrate.com/mortgages/homeowner-savings-survey/.