what percent of your net worth is in home equity?

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what percent of your net worth is in home equity?

0
35
20%
>0-10
28
16%
>10-20
48
27%
>20-30
48
27%
>30-40
9
5%
>40-50
4
2%
>50-75
3
2%
>75
1
1%
 
Total votes: 176

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LH
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what percent of your net worth is in home equity?

Post by LH » Tue May 01, 2012 2:05 pm

what percent of your net worth is in home equity?

Net worth = assets - liabilities

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GregLee
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Re: what percent of your net worth is in home equity?

Post by GregLee » Tue May 01, 2012 2:14 pm

I love polls, but people have such different ideas about "net worth", I don't know how to answer. Should I use values as in bubblehead's table, counting an estimate of my pension and SS value? (And, by the way, you could just look in that table, I suppose.)
Greg, retired 8/10.

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Random Musings
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Re: what percent of your net worth is in home equity?

Post by Random Musings » Tue May 01, 2012 2:17 pm

Should I take into consideration the upcoming bear market? :wink:

RM
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NorCalDad
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Re: what percent of your net worth is in home equity?

Post by NorCalDad » Tue May 01, 2012 2:27 pm

Wait, there's no negative percentage option? :(

Sam I Am
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Re: what percent of your net worth is in home equity?

Post by Sam I Am » Tue May 01, 2012 2:27 pm

Message deleted.
Last edited by Sam I Am on Tue Oct 08, 2013 2:22 pm, edited 1 time in total.

YDNAL
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Re: what percent of your net worth is in home equity?

Post by YDNAL » Tue May 01, 2012 2:39 pm

LH wrote:what percent of your net worth is in home equity?

Net worth = assets - liabilities
Investor A has $500K house - $0 mortgage and $500K in Stocks, Bonds, Cash, etc. Net worth is $1 million.

Investor A2 has $500K house - $500 mortgage and $1 million in Stocks, Bonds, Cash, etc. Net worth is $1 million.

A has 50% of NW in home equity.
A2 has 0% of NW in the home equity.
A & A2 are the same investor, but A2 happened to have refinanced today.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

sscritic
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Re: what percent of your net worth is in home equity?

Post by sscritic » Tue May 01, 2012 2:46 pm

YDNAL wrote: Investor A has $500K house - $0 mortgage and $500K in Stocks, Bonds, Cash, etc. Net worth is $1 million.

Investor A2 has $500K house - $500 mortgage and $1 million in Stocks, Bonds, Cash, etc. Net worth is $1 million.

A has 50% of NW in home equity.
A2 has 0% of NW in the home equity.
A & A2 are the same investor, but A2 happened to have refinanced today.
Thanks. I tried to make a similar point in another thread last week. Borrowing supports your stuff. Did the $500k loan go to support the $500k house or $500k of the $1 million in stocks and bonds? Without the $500k loan, he couldn't have both the $500k house and the $1 million portfolio. Now he could pay off that loan if he just sold 100 of his $5000 watches. Wait, do I mean to say the loan supports his watch collection as well? I guess I do; the loan allows him to have stuff of all kinds.

555
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Re: what percent of your net worth is in home equity?

Post by 555 » Tue May 01, 2012 2:59 pm

I think the numerator should be home value. I assume OP intended home value minus mortgage. Is that right? (For me mortgage=zero, so it's the same.)

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rdmayo21
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Re: what percent of your net worth is in home equity?

Post by rdmayo21 » Tue May 01, 2012 4:39 pm

0%, and I don't see that changing anytime soon.

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tipswatcher
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Re: what percent of your net worth is in home equity?

Post by tipswatcher » Tue May 01, 2012 4:59 pm

When I typically compute my home equity, I don't include the value of my home. I have no mortgage, and I love my home, but the sucker is a liability, not an asset. I pay property taxes (which are rising at an alarming rate), maintenance, storm water fees, painting, roof, garden supplies, etc., etc. My cash flow from the house is very negative. Not selling anytime soon and its value has probably dropped 10% in the last two years, while my property taxes have risen 15%.
Last edited by tipswatcher on Wed May 02, 2012 4:19 pm, edited 1 time in total.
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goldendad
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Re: what percent of your net worth is in home equity?

Post by goldendad » Tue May 01, 2012 6:27 pm

20 percent.

dkturner
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Re: what percent of your net worth is in home equity?

Post by dkturner » Tue May 01, 2012 6:44 pm

tipswatcher wrote:When I typically compute my home equity, I don't include the value of my home. I have no mortgage, and I love my home, but the sucker is a liability, not an asset. I pay property taxes (which are rising at an alarming rate), maintenance, storm water fees, painting, roof, garden supplies, etc., etc. My net income is zero. Not selling anytime soon and it's value has probably dropped 10% in the last two years, while my property taxes have risen 15%.
You should walk away from your home and rent an apartment so you can save money?

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Midpack
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Re: what percent of your net worth is in home equity?

Post by Midpack » Tue May 01, 2012 6:47 pm

7%, and very happily so...

But I'm relatively old, I would expect much higher from someone younger.
Last edited by Midpack on Wed May 02, 2012 10:41 am, edited 1 time in total.
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tipswatcher
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Re: what percent of your net worth is in home equity?

Post by tipswatcher » Tue May 01, 2012 8:59 pm

You should walk away from your home and rent an apartment so you can save money?
No I don't plan to do that. I love my home, great neighborhood, nice kitchen. (I cook.) I own it clear.

But it is still a liability.

Said that ... I don't have a better living option at the moment. If I did - a greatly better option - I certainly would sell it and move on.
TIPS: Perfect investment for imperfect times?

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joe8d
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Re: what percent of your net worth is in home equity?

Post by joe8d » Tue May 01, 2012 9:34 pm

I paid cash for my condo 15 years ago.I don't even factor it in.
All the Best, | Joe

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LH
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Re: what percent of your net worth is in home equity?

Post by LH » Tue May 01, 2012 11:16 pm

YDNAL wrote:
LH wrote:what percent of your net worth is in home equity?

Net worth = assets - liabilities
Investor A has $500K house - $0 mortgage and $500K in Stocks, Bonds, Cash, etc. Net worth is $1 million.

Investor A2 has $500K house - $500 mortgage and $1 million in Stocks, Bonds, Cash, etc. Net worth is $1 million.

A has 50% of NW in home equity.
A2 has 0% of NW in the home equity.
A & A2 are the same investor, but A2 happened to have refinanced today.
That is a given though? Implicit in the issue?

Its a big part of what the poll is looking at, what portion one chooses to hold in what way.

I could pay off my mortgage entirely now, instead I hold some more of it in my AA stock/bond portfolio, and use the leverage.

Its an interesting mix. Holding home debt at say a 4 percent interest currently, at say 25 percent tax rate, means I hold it at 3 percent interest tax adjusted. Which is basically expected inflation... Which means the money is "free" in real terms expectantly. Which means to NOT hold at least some home leverage, seems kinda silly. But of course, there is a nice complicated risk benefit deal there. I am not only financing investment, but consumption too. Fascinating issue. Of course, paying the sucker off entirely, with recent events coupled with human recency bias, is HUGELY "rationally" and gut level appealing now.

Debt is a nice inflation hedge.

Mixed in with those who can pay it off, are those who are just starting out, and need a place to live, and dont want to rent. I was thinking of another poll, of for those whose taxable investments are bigger than home mortgage remaining, what percentage of home equity is net worth. But even those, hold the ability to just pay off the house, versus investing in an AA type portfolio. And its hard to really sort it out anyway, so decided to just go general.

I would rather be a mix of a and a2. And though picking at the extremes is tough, I would rather be structured as a than a2.
Last edited by LH on Tue May 01, 2012 11:24 pm, edited 1 time in total.

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LH
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Re: what percent of your net worth is in home equity?

Post by LH » Tue May 01, 2012 11:23 pm

555 wrote:I think the numerator should be home value. I assume OP intended home value minus mortgage. Is that right? (For me mortgage=zero, so it's the same.)
Yeah, I just mean the standard definition of home equity.
home equity
The current market value of a home minus the outstanding mortgage balance.
http://www.investorwords.com/5605/home_equity.html

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Noobvestor
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Re: what percent of your net worth is in home equity?

Post by Noobvestor » Wed May 02, 2012 12:49 am

If my current offer goes through and I count transaction costs: about 10%.

If I go for a wilder and bigger idea I've been thinking about: about 25%

Both are condos, though - one would run about .5% of net worth/year in taxes/fees and the other more like 1.5% of net worth, so it's less that I'm against having 25% in RE and more that the ongoing costs are pretty huge on the latter one.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

YDNAL
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Re: what percent of your net worth is in home equity?

Post by YDNAL » Wed May 02, 2012 9:37 am

LH wrote:
YDNAL wrote:
LH wrote:what percent of your net worth is in home equity?

Net worth = assets - liabilities
Investor A has $500K house - $0 mortgage and $500K in Stocks, Bonds, Cash, etc. Net worth is $1 million.

Investor A2 has $500K house - $500 mortgage and $1 million in Stocks, Bonds, Cash, etc. Net worth is $1 million.

A has 50% of NW in home equity.
A2 has 0% of NW in the home equity.
A & A2 are the same investor, but A2 happened to have refinanced today.
That is a given though? Implicit in the issue?

Its a big part of what the poll is looking at, what portion one chooses to hold in what way.
LH,

I don't think I know what you just said/meant... you have an interesting way with words.:D
I would rather be a mix of a and a2. And though picking at the extremes is tough, I would rather be structured as a than a2.
This quote is clearer and also delves into personal preference/choice.

The illustration I provided is all about personal circumstances and choice. A chose no debt ($0 mortgage). A2 (meaning A too) changed his/her mind and refinanced 100% LTV yesterday. Choices, choices... Regardless of choice, there is no impact on Net worth - as you said: ASSETS - LIABILITIES = NW, but each choice renders a different measure of house EQUITY vs. NW.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

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Devil's Advocate
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Re: what percent of your net worth is in home equity?

Post by Devil's Advocate » Wed May 02, 2012 9:50 am

I have approximately 13% in personal home equity.

This is approximately 4 % of my net worth.

This isn't a to keep mortgage or not thread, but I am actively paying down my mortgage. Will be paid off in 4 years. 11 yrs ahead of 15 yr term. I am also maxing my 401k.

My goal in personal finance is not to end up with as much money as possible in x years. But to reach financial independence ASAP. I will continue to work I am sure, but to work on MY terms is going to be awesome.

DA :beer

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LH
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Re: what percent of your net worth is in home equity?

Post by LH » Thu May 03, 2012 9:10 am

YDNAL wrote:
LH wrote:
YDNAL wrote:
LH wrote:what percent of your net worth is in home equity?

Net worth = assets - liabilities
Investor A has $500K house - $0 mortgage and $500K in Stocks, Bonds, Cash, etc. Net worth is $1 million.

Investor A2 has $500K house - $500 mortgage and $1 million in Stocks, Bonds, Cash, etc. Net worth is $1 million.

A has 50% of NW in home equity.
A2 has 0% of NW in the home equity.
A & A2 are the same investor, but A2 happened to have refinanced today.
That is a given though? Implicit in the issue?

Its a big part of what the poll is looking at, what portion one chooses to hold in what way.
LH,

I don't think I know what you just said/meant... you have an interesting way with words.:D
I would rather be a mix of a and a2. And though picking at the extremes is tough, I would rather be structured as a than a2.
This quote is clearer and also delves into personal preference/choice.

The illustration I provided is all about personal circumstances and choice. A chose no debt ($0 mortgage). A2 (meaning A too) changed his/her mind and refinanced 100% LTV yesterday. Choices, choices... Regardless of choice, there is no impact on Net worth - as you said: ASSETS - LIABILITIES = NW, but each choice renders a different measure of house EQUITY vs. NW.
?
Yeah, that's implicit in the poll. For anyone who has ability to entirely pay off mortgage, but has not, yeah that's a choice.
For anyone who does not have ability to entirely pay off mortgage, but chooses to not pay it off first, and instead puts money to asset allocation. That's a choice. It's a continual choice we make what percentage of home equity is of our net worth, you could rent, make it zero, you could pay off, you could buy a bigger house when you get near to paying off old one. Refinance, cash out or cash in etc. it's a highly malleable thing.

That's what the poll is about, the choice one makes in terms of home equity percentage of net worth. I guess for some, it's not consciously looked at, is that what you are saying? All the above is true. Nobody argues though that a refinance, ignoring costs, changes net worth? Nobody who has been through a refi, would think that it does? Prior to a refi, I do not think anyone would either really?

Percentage home equity of net worth is basically a choice of leverage, that is buried inside a behavioral box of sorts.

The choice of leverage to use does expectationally influence future net worth though. It also adds in inflation hedging, as well as deflation risk, etc.

cosmicblue
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Re: what percent of your net worth is in home equity?

Post by cosmicblue » Thu May 03, 2012 3:07 pm

NorCalDad wrote:Wait, there's no negative percentage option? :(
Yes, I also need the negative position. My net worth is negative since my house is upside down :(

ofckrupke
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Re: what percent of your net worth is in home equity?

Post by ofckrupke » Thu May 03, 2012 3:13 pm

cosmicblue wrote:
NorCalDad wrote:Wait, there's no negative percentage option? :(
Yes, I also need the negative position. My net worth is negative since my house is upside down :(
Then you don't need a negative percentage, do you. Most likely, ">75%" is the best choice.

555
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Re: what percent of your net worth is in home equity?

Post by 555 » Thu May 03, 2012 3:51 pm

cosmicblue wrote:
NorCalDad wrote:``Wait, there's no negative percentage option? :(''
``Yes, I also need the negative position. My net worth is negative since my house is upside down :(''
Well if your house goes down more so that you net worth is also negative, then you'll be able to enter a positive percentage. :happy

RenoJay
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Re: what percent of your net worth is in home equity?

Post by RenoJay » Fri May 04, 2012 3:51 pm

Would have been much higher without this pesky housing depression in Nevada.

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docneil88
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Re: what percent of your net worth is in home equity?

Post by docneil88 » Fri May 04, 2012 5:00 pm

For those interested, here is a different but related poll and thread started by me. It began in March 2008 and is titled "Ratio of value of home to net worth?":

http://www.bogleheads.org/forum/viewtop ... w=viewpoll

blackball
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Re: what percent of your net worth is in home equity?

Post by blackball » Fri May 04, 2012 6:45 pm

0%. Housing prices in TO are crazy and still going up.

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ofcmetz
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Re: what percent of your net worth is in home equity?

Post by ofcmetz » Fri May 04, 2012 10:11 pm

Almost exacty 27%.
Never underestimate the power of the force of low cost index funds.

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