Cities Where Homeowners Are Deepest in Mortgage Debt

Household debt is up, and to make improvements or find extra cash in a crisis, many homeowners may have refinanced their mortgages, leaving them overleveraged.
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Last year, many people learned that a house is good thing to have — homes also served as offices, classrooms and places of safety.

But buying a home can also be a potentially unsound financial decision and a huge financial commitment. While mortgage rates are still historically low, home prices are high and inventory is limited.

“Buying a home with a mortgage is a rat’s nest of potential financial calamities,” says Jonathan Halket, an assistant professor and faculty fellow in real estate at Texas A&M University. Not understanding the cost of your mortgage, overleveraging without a safety net and expecting home prices to keep rising are common mistakes homebuyers make, Halket says.

To make improvements or find extra cash in a crisis, many homeowners may have refinanced their mortgages. Household debt increased by $87 billion in the third quarter of 2020, according to a recent study.

In any crisis, whether is a major repair to the home, a job loss or illness, or an economic disaster like the pandemic, being overleveraged and not being able to pay a mortgage, especially in the longterm, is a personal finance disaster.

To find the U.S. cities where people are most overleveraged on their homes, WalletHub calculated the ratio between the median mortgage debt (based on TransUnion data from September 2020) and the median income in each of 2,530 U.S. cities. They then calculated the ratio between each city’s median mortgage debt and its median home value.

For each ratio a score was determined, establishing the overall ranking. 

Based on WalletHub’s study, these are the cities where people are most overleveraged on their homes.