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Free & Clear : About 15% of Southland owners enjoy the security of having paid off their home loans.

February 18, 1996|LAURA HENNING | SPECIAL TO THE TIMES; Laura Henning is a Long Beach freelance writer

Paul Jacobs and his wife, Blanche, threw a little party in their Van Nuys backyard not long ago to celebrate something most homeowners only dream of.

After 32 years of payments on their three-bedroom home, they had written their last mortgage check. The place was theirs, free and clear.

A dozen relatives applauded as Jacobs ignited a photocopy of the promissory note over the patio barbecue at the mortgage-burning party, a ritual more common decades ago.

The celebration marked the end of "30 years of sometimes struggling to make the payments and sometimes not," the retired importer of menswear said.

"You know how life has its ups and downs. Now we never have to worry about having a place to live. It's a relief."

The Jacobses are members of a "sizable minority," said their son, Bill Jacobs, president of the California Mortgage Bankers Assn. Thirty percent to 35% of homeowners nationwide own their property free and clear.

These homeowners are mainly in the conservative, more established communities of the Midwest and the South, where people not lured by jobs elsewhere remain in their homes for longer periods, Jacobs said.

In Los Angeles County, about 18% of the 1.4 million homes have no mortgage, according to DataQuick, a real estate information company in La Jolla. The community with the highest percentage of paid-off homes is Avalon, on Santa Catalina Island, with 36.5%.

In the metropolitan area, Santa Fe Springs, at 24.8%, has the highest percentage of free-and-clear homes, followed by Monterey Park, 23.4%; Commerce, 23.2% and Montebello, 22.7%.

Among Orange County's 481,000 homes, 13.7% are mortgage-free. The highest percentage of paid-off homes is in Sunset Beach, at 24.6%, followed by Corona del Mar, 20.8%; Modjeska, 19.3%; Los Alamitos, 19% and La Habra, 17.3%

An estimated 82% of homeowners older than 65 own their homes outright, according to the annual housing survey of the U.S. Census.

Jacobs said this statistic reflects the fact that older Americans' attitudes toward debt were shaped by having gone through the Great Depression, when banks seized homes and businesses put up as collateral.

Today, he said, the younger generation has a much more relaxed attitude toward debt. "Borrowing against the home is the only tax write-off the middle class enjoys and widely uses," he said.

Seventy-year-old Vernon Wintroub lost that tax advantage when he paid off his 1,800-square-foot, three-bedroom Agoura Hills home, but he is thankful to own the place outright.

"I worked for 52 years. It's time I owned something," the retired aerospace engineer said.

Wintroub decided to pay off his mortgage in 1993, when he was getting just 6% on a certificate of deposit and was paying 10% on his $50,000 mortgage.

"When I went to the bank to pay it off," Wintroub said, "the young girl there said rather enviously, 'Oh, boy, I wish I could do that!' "

"I really wanted to have a party," said his wife, Eleanor, "but we just went out to dinner."

Paying off the mortgage gives older homeowners a sense of security, said Dr. Jon Pynoos, professor of gerontology at USC. "In an insecure world, particularly with talk of cuts in various programs from Social Security to Medicare," Pynoos said, "not having to make payments on the home may be one of the few secure things going for the elderly."

The paid-off home offers emotional succor as well.

The home has more psychological implications for the elderly than for the young, Pynoos said. This is where they raised their children; they know their neighbors and local shopkeepers. For many, their world begins to shrink to home.

"So paying off the mortgage gives you the sense that the house is really yours," said Pynoos. "It doesn't belong to the bank or to somebody else. It's really yours."

However, Gib Kerr, president of the Los Angeles chapter of the Institute of Certified Financial Planners, said that sense of security may be illusory.

"I've seen people living in $200,000 homes owned free and clear but [who] can't afford the maintenance and taxes," Kerr said. "It's amazing how some people are hooked on the ownership of a house."

For those in danger of losing homes because of tax or maintenance expenses, Kerr suggests selling the home, purchasing a modestly priced condo with a mortgage for the tax advantage and putting the rest in conservative income-producing investments.

"I ask my clients to visualize a drawer in the kitchen with $200,000 in cash sitting in it accomplishing absolutely nothing," Kerr said. "I invariably get a call. It may be a year after, but I find that $200,000 begins to bug them. 'I love this house, but do I love it that much?' they wonder."

Still, paying off his home was a crucial part of Gordon Dillinger's carefully laid retirement plan. "To me," said the former Jet Propulsion Laboratory engineer, "pay off the home and everything else falls into place."

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