Why subtract mortgage balance from your net worth?

[Anonymous]

Honest question: if you are not under water on your mortgage, why should you subtract the balance from your net worth. Seems like you should just include the equity you have and be done. It’s not like student loans, I am actively purchasing additional equity into a tangible asset.

[Anonymous]

Equity is what you’ve put in —downpayment + principle paid. If you use equity to compute your net worth, then you don’t need to subtract your mortgage balance.

However, if you use the value of your house then you need to subtract the mortgage. This calculation gets you to your equity.

[Anonymous]

OP here, yes! That’s what I thought.

[Anonymous]

Anonymous wrote:Honest question: if you are not under water on your mortgage, why should you subtract the balance from your net worth. Seems like you should just include the equity you have and be done. It’s not like student loans, I am actively purchasing additional equity into a tangible asset.

Dear lord. Get thee to a financial literacy class, and fast.

[Anonymous]

Yes. The lights are on, but nobody’s home.

[Anonymous]

Keep it simple. If you were to sell the home today, how much money would you get after all selling cost and I mean all. Now add that to all your other money top get NW.

[Anonymous]

How do you deal with monthly mortgage payments? Only a portion of that is an expense (insurance and taxes) with the remainder going towards equity. Do you just factor in the expense items on your spend budget and just increment the home equity portion as you pay down principal?

[Anonymous]

Because it is debt.

[Anonymous]

I don’t understand what you are saying.

The equity is the value of the house less the mortgage.

No one is subtracting the mortgage twice.

[Anonymous]

Anonymous wrote:I don’t understand what you are saying.

The equity is the value of the house less the mortgage.

No one is subtracting the mortgage twice.

Based on the comments, I think some people are.

[Anonymous]

Let’s get to the bottom of this, what is my net worth:
Savings:$10
Equity:$7
Remaining mortgage balance:$5
Student loans: $2
No other debt.

Is my net worth $15 or is it $10

[Anonymous]

Anonymous wrote:Let’s get to the bottom of this, what is my net worth:
Savings:$10
Equity:$7
Remaining mortgage balance:$5
Student loans: $2
No other debt.

Is my net worth $15 or is it $10

Assuming "Equity" is the amount of cash you would have after selling your home, and paying off your remaining mortgage balance, $15.

If "Equity" is how much you think your home would sell for (net of broker/transaction fees/taxes), then $10.

[Anonymous]

Anonymous wrote:Let’s get to the bottom of this, what is my net worth:
Savings:$10
Equity:$7
Remaining mortgage balance:$5
Student loans: $2
No other debt.

Is my net worth $15 or is it $10

The property value of your house is $12. $12-5=$7 (equity)

Your NW= savings + equity - loans or $15

Or you can calculate your NW as savings + property value - loan- mortgage balance. $10 + $12 - $2 -$5 = $15

[Anonymous]

It's 6 of one, half a dozen of the other.

[Anonymous]

Is this a joke? No one is this dumb.