How much of your net worth is tied to your home?

[TheHaitian]

Or minus your primary home what is your net worth?

Basically this question came because someone was going by the assumption that:
A) buying a house was the best way to built wealth
B) most Americans net worth is tied to their homes.
C) most Americans their mortgage is their biggest expense.

The person did not believe me when I told him that combined we have more invested in our retirement accounts vs equity in our home (duh we only bought 1 year ago)!

Second our mortgage is not our biggest expense, saving for retirement is.

Third our plan is not to use the home as a retirement tool in our old ages (ex:sell home and move to lower cost area; pocket left over equity).

[SVT]

$0 net worth tied to a home.  I rent.

[TheHaitian]

Jul 26, 2017 12:18:22 GMT -5 @anne81 said:

I think B & C are true for most Americans though.

Why do you think this is so?

[ken a.k.a OMK]

I don't count my house, which I own, in determining net worth. Got to live somewhere.

[dannylion]

Home equity maybe 15% of net worth, but since I won't know what my home is actually worth until I sell it, it's hard to determine how much of my net worth the equity represents.  

No mortgage, so my biggest expenditure is investments/savings, but the biggest actual expense is taxes.   

[Deleted]

Jul 26, 2017 12:35:15 GMT -5 ken a.k.a OMK said:

I don't count my house, which I own, in determining net worth. Got to live somewhere.

But it still has value though.  Two 65 year old people one with a paid for house and one without.  The one is paying rent and the other rent free, or he could sell the house and use that for rent and not need the income.  My Grandparents downsized to a condo and had 200K left over for travel and living expenses.

[Deleted]

Currently my equity is about 25% of net worth, but other investments are growing faster now so I suspect that percentage to drop every year even though I'm paying off 12K of principal every year. 

[milee]

10% - 15%.

[Tiny]

The combination of all my properties is about 1/4th of my Net Worth.  (my 3 properties have a total value of a really nice SFH).   I've had mortgage debt for over 20 years though... - at this point it's relatively small compared to the value of the houses. 

I do think buying a house can be part of the over-all wealth building plan.    But, I'm beginning to  think some new home owners are alittle unclear as to what kind of responsibility a house IS...  I'm watching several neighborhood properties  purchased in the last 5 years slowly decay - because their owners seem to be unclear that houses need maintenance - the landscaping has become over grown, when a storm door broke - it was removed and now the expensive front door it was protecting is getting battered by the elements.  One house has had a 'blue tarp' on the roof for the last 6 months (maybe they are waiting for insurance money)

My house (and then houses) were certainly part of my over all wealth building strategy.

I would agree that "mortgage" is the biggest expense for most people (you could substitute rent for "mortgage", too).    Heck, even when my house was paid off - my Taxes/insurance were STILL my biggest FIXED monthly expense ($500 a month).      Overall - isn't "shelter" one of American's biggest expenses? 

 

If I had to cover the expenses for all 3 properties out of pocket long term (say - no renter for in either house for 6 months or longer) - I'd have to cut back on my retirement savings (which IS my biggest expense by far).

 

[The Walk of the Penguin Mich]

No mortgage, but property tax is still our largest housing expense each year,  The house and adjacent property is probably less than 5% of our net worth.

In this city, the house has probably appreciated 300-400% since it was bought, if the house that was sold 2 doors down is any indication.  But there is no way we could live ANYWHERE here for what we pay in property tax, not even in a 1 BR rental.

[midjd]

Jul 26, 2017 12:46:05 GMT -5 minnesotapaintlady said:

Currently my equity is about 25% of net worth, but other investments are growing faster now so I suspect that percentage to drop every year even though I'm paying off 12K of principal every year. 

Same here. We bought in 2010 and I don't think there's a ton of room for local real estate prices to go up (rents in the city are already bordering on insane), so I would expect/hope for it to keep dropping.

[hoops902]

Jul 26, 2017 12:22:53 GMT -5 TheHaitian said:

Jul 26, 2017 12:18:22 GMT -5 @anne81 said:

I think B & C are true for most Americans though.

Why do you think this is so?

Because saving for retirement is not actually an expense, and most Americans didn't just buy their house 1 year ago so they've built some equity (combined with the fact we've all seen a lot now that says most Americans haven't really saved much). 

As for the original question, I'd say about 50% of our net worth is tied to our current primary home because we own it outright. Once this house sells and we move, we'll only have about 10% tied to that house.

[ArchietheDragon]

Ours is about 10%. 

[whoisjohngalt]

I don't care how much equity we have - it's all fake money to me. So I never consider our house in my NW calculations.

[jeffreymo]

Not counting our business equity in the net worth calculation - our home equity is 22%.

[swamp]

About 20%

[Deleted]

5%.  Largest recurring monthly expense is my health insurance premium.

[chen35]

I don't typically include it, but it would probably be 10-15% if I did.
Highest expense is by far taxes. Mortgage comes in a very distant 2nd.

[Deleted]

My biggest expense is definitely my mortgage at $15,600/year.  Next in line after that is probably food at around 5K.  Property taxes are at about 4th or 5th after childcare and school tuition at $2300 and I get a refund of a big chunk of that. 

I hate my mortgage so much. 

[gooddecisions]

My biggest expense is daycare which is more than $40 grand a year. No other expenses come close. 

I am surprised people on a money board don't include the value of their home (minus mortgage) in their net worth calculations.

[zibazinski]

Jul 26, 2017 13:49:58 GMT -5 minnesotapaintlady said:

My biggest expense is definitely my mortgage at $15,600/year.  Next in line after that is probably food at around 5K.  Property taxes are at about 4th or 5th after childcare and school tuition at $2300 and I get a refund of a big chunk of that. 

I hate my mortgage so much. 

Are you going to make it before DS graduates?

[Deleted]

Jul 26, 2017 14:02:31 GMT -5 zibazinski said:

Jul 26, 2017 13:49:58 GMT -5 minnesotapaintlady said:

My biggest expense is definitely my mortgage at $15,600/year.  Next in line after that is probably food at around 5K.  Property taxes are at about 4th or 5th after childcare and school tuition at $2300 and I get a refund of a big chunk of that. 

I hate my mortgage so much. 

Are you going to make it before DS graduates?

Not even close.  After this August payment I have 9 years and 7 months left.  I'll still owe about 94K at his 18th birthday.

[bookkeeper]

Around 18%


Primary home is valued around $300,000.  Second home is around $160,000.  We have a small mortgage on our primary home, less than $50,000.


For years our investments made up most of our net worth.  We purchased a second home to escape South Dakota's winter and own a real asset rather than just a number on a statement page.


Someday farm land will be added to the mix when my mother passes on.  That will make our investment/real estate mix more like 50%/50%.

[resolution]

My residence is 15% of my net worth, and we have an additional 25% in a rental  property.

We still have a mortgage, but it's $550 a month, so we spend more on a lot of other things like taxes, investing, and food. But if we looked only at fixed line items in my budget, the mortgage is the highest. 

I believe that the net worth of Americans that own homes is significantly higher than that of Americans that rent. Part of it would be because lower income people may not qualify  for a home, but I believe that part of it is the enforced savings of having part of the payment go to principle every month.

[thyme4change]

Between 20% and 25%. Part of that is our neighborhood has become really desireable. I didn't expect our house to be worth what it is.

[zibazinski]

Jul 26, 2017 14:16:43 GMT -5 minnesotapaintlady said:

Jul 26, 2017 14:02:31 GMT -5 zibazinski said:

Are you going to make it before DS graduates?

Not even close.  After this August payment I have 9 years and 7 months left.  I'll still owe about 94K at his 18th birthday.

Crap. Can you refinance maybe?

[Deleted]

Jul 26, 2017 15:40:06 GMT -5 zibazinski said:

Jul 26, 2017 14:16:43 GMT -5 minnesotapaintlady said:

Not even close.  After this August payment I have 9 years and 7 months left.  I'll still owe about 94K at his 18th birthday.

Crap. Can you refinance maybe?

I could do that, but I really, really want it just gone!  Extending the term kind of makes me ill now that I'm finally making progress (it's dropping $1000/month).  I keep doing all the math on cutting expenses and how long savings will hold out and I'll probably try to tough it out.  Hard to say.  Biggest unknown is Carrot's dad and CS there.  I could be in much better shape in 3 years or I could be really hurting. 

[giramomma]

Our mortgage is not our largest expense.

Private school tuition is..Though, I should just lump it all together and say by far, my kids are my largest expense.

I don't consider retirement an "expense." It's savings. I'm not a business and retirement is not a liability.

Our home equity is about 22% of our NW, excluding my pension benefit if I were to leave my job tomorrow.

If you include the current cash value of my pension..home equity is 18% of our total NW.

I don't see the percentage ever getting smaller than that..Unless our retirement savings doubles. Which it won't.

[TheHaitian]

Jul 26, 2017 12:58:58 GMT -5 hoops902 said:

Jul 26, 2017 12:22:53 GMT -5 TheHaitian said:

Why do you think this is so?

Because saving for retirement is not actually an expense, and most Americans didn't just buy their house 1 year ago so they've built some equity (combined with the fact we've all seen a lot now that says most Americans haven't really saved much). 

As for the original question, I'd say about 50% of our net worth is tied to our current primary home because we own it outright. Once this house sells and we move, we'll only have about 10% tied to that house.

This person was not saving for retirement at all : their home was their retirement.

We live in DC and they have seen the value of their home increase by ~$400k since they purchased.

Their plan is to eventually cash in their equity down the road + wife pension (government employee) and move South.

Savings - expenses : ether way it is money I cannot spend right now from my paycheck.

[kittensaver]

Wow, I'm really the outlier here! Our house is currently about 40% of our net worth - BUT we have never - and are not going to - count on it as a "retirement fund" because we've seen how volatile the housing market has been since 2006 (the height, then the 2008 crash and currently, new absurd heights).

It is only a financially stable place to live in a market where most apartments are currently going for a monthly rent anywhere between 1 1/2 to 4 times FMR. It is only a matter of time until the bubble bursts again - all the signs are there. We (the Big We) learned nothing from the last crash, apparently.

We (me and DH) could crash a *very* long way and still be okay. Between Social Security and savings/investments we should be fine in retirement without figuring in the house. If we sell and move, the house will be gravy on top only.