Why I Don’t Include My House in My Net Worth
People love to include things that aren’t actually assets
If you look up the definition of “Net Worth”, you’ll find that it is the value of assets an individual or corporation owns minus the liabilities they owe.
What’s odd, however, is that while a mortgage is considered a liability (an outstanding loan you need to pay back), a house is considered a positive part of your net worth — an asset.
See the example Investopedia provides below.
Seems pretty straight forward. The only problem…
A house is only an asset if and when you can find a buyer.
The House
If the couple in the example were to successfully sell their home for $250,000, with $100,000 left on their mortgage, they will first need to pay off the remaining loan of $100,000 and then they can keep what’s left…sort of.
You also need to take into consideration taxes, closing costs, etc. So this number isn’t so cut and dry.
