Your home is likely your most valuable asset. It's where you live, raise your family and keep your belongings. So, it's natural to include its value when calculating your net worth. But what if you're underwater on your mortgage?
Or don't want to sell in today's market? Shouldn't your home be excluded from net worth calculations? There are different opinions on this matter. Here we explore both sides of the argument and howworth will give you take on how to best include or exclude your home from net worth calculations.
Do you count your house in your net worth?
This seems like a simple question, but the answer is not so black and white. Your home is likely your most valuable asset, but there are a few factors that can complicate the decision of whether or not to include it in your net worth. Read on to learn more about how you should approach this net worth calculation and why some experts say that including your home in your net worth is a mistake.
Why You Don't want to Count Your House in Net Worth
There are several reasons why many financial experts recommend excluding your home's value from your net worth. First of all, it's an illiquid asset (it can't readily be turned into cash). If you need to sell, chances are that housing prices will fall, which means you'll either have to pay the bank back with your savings or take on debt. Even if you do owe less than your home is worth, you may not be able to sell in a hurry. Additionally, if the market has dropped since you purchased your home and it's now worth less than what you owe on it, then having a high net worth will actually make you look bad when lenders check your credit history.