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What is Free and Clear?

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Definition: You will often hear real estate agents and investors talk about free and clear real estate, but free and clear is also an aspiration of many home owners. Free and clear means there are no encumbrances such as a loan or mortgage.

If you have a 30-year fixed-rate mortgage and make the same monthly payment every month for 30 years, at the end of 30 years, you will now own your home free and clear. Free and clear means if you were to sell the home and wanted to make owner financing available for a new buyer, you would have no underlying lenders saying you could not do it.

Free and clear means an owner is free from making mortgage payments, but you still need to pay for such things as homeowner's insurance, property taxes, utilities and general maintenance.

You will also hear the term free and clear in reference to title. Assuming there is no cloud on title and you received a title insurance policy when you bought the home, you most likely enjoy clear title to the home.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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