What percentage of your net worth is your home equity?
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What percentage of your net worth is your home equity?
Mine is around 28%, curious about other bogleheads.
- Blueskies123
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Re: What percentage of your net worth is your home equity?
My house is paid off. I do not think of my house as part of my portfolio. I cannot spend it to buy food, I would have to move.
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Re: What percentage of your net worth is your home equity?
I think there was a recent thread with same question, maybe a few months ago.
My answer then, and now, is that I just retired at my FRA and my % for home equity is about 1/6 or 16.67%
My answer then, and now, is that I just retired at my FRA and my % for home equity is about 1/6 or 16.67%
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- ResearchMed
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Re: What percentage of your net worth is your home equity?
Care to rephrase this so it is somehow "actionable"?
Maybe something like, "What percentage of your net worth is your home equity, and how can it best be used in retirement without moving?"
(Hint: HELOC or Reverse Mortgage, but who knows what answers there might be!? )
RM
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Re: What percentage of your net worth is your home equity?
OP,
I do not count my house as part of my net worth. If someone is counting the house as part of their net worth, they had bought too much house.
KlangFool
I do not count my house as part of my net worth. If someone is counting the house as part of their net worth, they had bought too much house.
KlangFool
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Re: What percentage of your net worth is your home equity?
Let's not start *that* discussion/argument again here.
That equity IS there (assuming there is equity), so if some want to include it in net worth, fine.
For those who don't, then it would be zero percent.
And they'd have little or no interest in this topic, except as a curiosity.
Done.
RM
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Re: What percentage of your net worth is your home equity?
ResearchMed wrote: ↑Tue Dec 11, 2018 3:23 pmCare to rephrase this so it is somehow "actionable"?
Maybe something like, "What percentage of your net worth is your home equity, and how can it best be used in retirement without moving?"
(Hint: HELOC or Reverse Mortgage, but who knows what answers there might be!? )
RM
I agree with this. The raw data points are pretty much useless unless other positions are known...age relative to retirement (I would expect the housing % to increase closer to retirement as a mortgage gets paid down), perhaps income range (I would expect the housing % to decrease a bit as income and total assets increase). Of course, my "expectations" of the data might be proved wrong. But I think this sort of info is needed as well. That was my thought with the previous thread.
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Re: What percentage of your net worth is your home equity?
Home Equity of home as % of net worth = 11.5%
Market Value of home as % of net worth = 14.6%
Market Value of home as % of net worth = 14.6%
Re: What percentage of your net worth is your home equity?
Home equity IS part of your net worth. So therefore the calculation is straightforward but whether you decide to utilize this information in any meaningful way is not clear.
20% approx for us.
20% approx for us.
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Re: What percentage of your net worth is your home equity?
About 1/6. So what? About 16.67%.
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Re: What percentage of your net worth is your home equity?
Approximately 5%.
Last edited by Pigeye Brewster on Tue Dec 11, 2018 3:56 pm, edited 1 time in total.
Re: What percentage of your net worth is your home equity?
Paid for home is 16% of our net worth.
Re: What percentage of your net worth is your home equity?
Still paying it down, but I'd say 16 percent.
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Re: What percentage of your net worth is your home equity?
We owe ~$90k on a home worth ~$250k, so approximately 15%.
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Re: What percentage of your net worth is your home equity?
Bogleheads networth levels:
Level 1: include everything in one’s possessions in the net worth, including car equity, furnitures, bicycle etc. All investable/liquid assets.
Level 2: only include the “big items” ie. house, vacation home, collectibles. And all investable/liquid assets.
Level 3: only include investable/liquid assets
Level 4: only include investable assets. Don’t even count the emrgency fund or cash in bank accounts.
Level 1: include everything in one’s possessions in the net worth, including car equity, furnitures, bicycle etc. All investable/liquid assets.
Level 2: only include the “big items” ie. house, vacation home, collectibles. And all investable/liquid assets.
Level 3: only include investable/liquid assets
Level 4: only include investable assets. Don’t even count the emrgency fund or cash in bank accounts.
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Re: What percentage of your net worth is your home equity?
Actionably: I cannot pay my retirement expenses with the home I live in. And, it's not counted as net worth. And, is not related to my allocation nor IPS though it is paid for.
How is home equity as a percentage of net worth actionable toward financial planning?
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Re: What percentage of your net worth is your home equity?
Level 5: ????MiddleOfTheRoad wrote: ↑Tue Dec 11, 2018 3:53 pm Bogleheads networth levels:
Level 1: include everything in one’s possessions in the net worth, including car equity, furnitures, bicycle etc. All investable/liquid assets.
Level 2: only include the “big items” ie. house, vacation home, collectibles. And all investable/liquid assets.
Level 3: only include investable/liquid assets
Level 4: only include investable assets. Don’t even count the emrgency fund or cash in bank accounts.
Re: What percentage of your net worth is your home equity?
less than 10%.
The problem with this metric it give little insight into the leverage/home value risk. It may mean that house is modest compared to portfolio. Or it may mean that you have a large house that is heavily financed.
$1m net worth.
Scen A:
$900k investments
$200k home
($100k) mortgage
$1m net worth
Scen B:
$900k investments
$900k home
(800k) mortgage
$1M net worth.
The problem with this metric it give little insight into the leverage/home value risk. It may mean that house is modest compared to portfolio. Or it may mean that you have a large house that is heavily financed.
$1m net worth.
Scen A:
$900k investments
$200k home
($100k) mortgage
$1m net worth
Scen B:
$900k investments
$900k home
(800k) mortgage
$1M net worth.
Re: What percentage of your net worth is your home equity?
39YO, Home equity 220K, 401K 260K, Cash 50K so I guess that is about 41.5%. I assume this percentage is higher due to my age.
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Re: What percentage of your net worth is your home equity?
Cash on Hand: $14,000
Retirement Accounts: $67,000
Home Equity: $99,000.
Looks like $99,000 / $180,000 = 55%.
Looking forward to the day where the retirement accounts are bigger than the home equity. But even though I'm putting in 25% of income toward retirement, the equity is growing faster (supposedly +$20k over the last three months, according to Zillow).
Retirement Accounts: $67,000
Home Equity: $99,000.
Looks like $99,000 / $180,000 = 55%.
Looking forward to the day where the retirement accounts are bigger than the home equity. But even though I'm putting in 25% of income toward retirement, the equity is growing faster (supposedly +$20k over the last three months, according to Zillow).
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Re: What percentage of your net worth is your home equity?
Of course you can. Reverse mortgage. Alternatively it can be sold and you can move to a rental.Sandtrap wrote: ↑Tue Dec 11, 2018 3:55 pmActionably: I cannot pay my retirement expenses with the home I live in. And, it's not counted as net worth. And, is not related to my allocation nor IPS though it is paid for.
How is home equity as a percentage of net worth actionable toward financial planning?
It is part of your net worth. Is someone that has $1 million in investments (no debt) in the same financial position as someone that has $1 million in investments (no debt) and a $500k paid off house? You may not count it as part of your retirement plan or assets, but the definition of net worth is pretty simple and universal.
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Re: What percentage of your net worth is your home equity?
Ours is 20%.
Last edited by Gardner's Son on Tue Dec 11, 2018 6:08 pm, edited 4 times in total.
Re: What percentage of your net worth is your home equity?
Are you taking into account net equity (what cash you would take out if you sold today, ie - in most areas the transaction cost will be 7-10% when you sell your home the traditional way through a realtor) or simply value minus mortgage? In HCL markets the difference could amount to $100k for many.
Re: What percentage of your net worth is your home equity?
Interesting.by Sandtrap » Tue Dec 11, 2018 3:55 pm
KlangFool wrote: ↑Tue Dec 11, 2018 3:28 pm
OP,
I do not count my house as part of my net worth. If someone is counting the house as part of their net worth, they had bought too much house.
KlangFool
Actionably: I cannot pay my retirement expenses with the home I live in. And, it's not counted as net worth. And, is not related to my allocation nor IPS though it is paid for.
How is home equity as a percentage of net worth actionable toward financial planning?
I don't need to but I certainly could pay my retirement expenses and any other costs I choose to pay with my home by taking out a loan. It is not part of my allocation, but it effects how I set my allocation.
Actionable to financial planning? Hmmm .... if a relative said to me I don't count my paid for San Francisco home where i live which is valued at $5 million as an asset or consider it in my financial plans I would scratch my head, especially if this came from an 85 year old single person who plans to transition to other living arrangements in the next three years. Should they not count it and refuse purchase airline tickets to visit family on holidays and special occasions as part of their financial planning because they "can't afford it" because they don't have the cash flow from SS and other investments?
KF ... say in my example this relative had lived in SF for 55 years and enjoyed the appreciation that has happened there during this time .... under your strict definition if he/she chooses to count it in net worth then they "had bought too much house."
No one has to consider it in their allocations or any other matter related to their financial life if they choose to ignore it. That's their choice just as they can ignore SS, life insurance, or anything else in their planning if they choose. We on the board are re-plowing old ground here on the NW dialogue. The fact is under any reasonable definition the value of an asset is in fact part of a person's net worth.
Last edited by J295 on Tue Dec 11, 2018 4:18 pm, edited 2 times in total.
Re: What percentage of your net worth is your home equity?
I dont include my home as part of my net worth.
Those who do typically have lower savings/investments...and it just sounds better when you include your home.
Those who do typically have lower savings/investments...and it just sounds better when you include your home.
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- ResearchMed
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Re: What percentage of your net worth is your home equity?
Whoa there!
There are plenty of us who are VERY comfortable (and in our case, we'll may have higher income once DH retires than we do now).
However, we have no desire for the maintenance of a home, and we also prefer to live where there is care available, too, once we reach that stage (assisted living, perhaps in conjunction with independent living and/or skilled nursing).
Once we are *there*, we'd have exactly zero use for any owned residence.
And we have no heirs who are eager to "get" the house.
But we do plan to apply the equity towards our future care...perhaps get a larger unit, or do more traveling if we are able to do so, etc.
Owning a home at that point? Why?
That makes us - and others like us - among the "lower savings/investments" group, who "need" the equity to "sound better"?
Really?
RM
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Re: What percentage of your net worth is your home equity?
Home equity is of course part of net worth, whether you count it as part of spendable retirement assets or not. Net worth is a technical term with an actual definition that's commonly agreed upon (assets minus liabilities). Where's the dead horse emoji?
Anyway, 1/3 of our net worth is home equity (no mortgage). And yes, that fact affects our financial decisions. We can't spend home equity directly, so we don't count it when calculating how much we can spend in retirement. But if we need it, for example if one of us needs long term care for a long time, we can sell the house or take a reverse mortgage. So we consider the house to be our long term disaster plan, and we can play closer to the edge of the cliff with our spendable assets than we would be able to otherwise.
Anyway, 1/3 of our net worth is home equity (no mortgage). And yes, that fact affects our financial decisions. We can't spend home equity directly, so we don't count it when calculating how much we can spend in retirement. But if we need it, for example if one of us needs long term care for a long time, we can sell the house or take a reverse mortgage. So we consider the house to be our long term disaster plan, and we can play closer to the edge of the cliff with our spendable assets than we would be able to otherwise.
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Re: What percentage of your net worth is your home equity?
I don’t like to discuss net worth, because my response is “who’s asking?” OTOH, my house is material to my ability to weather a storm, literally and figuratively, so it should be considered. My stocks could go down 50%, just as the resale value of my house could go down 50%; why count one and not the other?michaeljc70 wrote: ↑Tue Dec 11, 2018 4:11 pmOf course you can. Reverse mortgage. Alternatively it can be sold and you can move to a rental.Sandtrap wrote: ↑Tue Dec 11, 2018 3:55 pmActionably: I cannot pay my retirement expenses with the home I live in. And, it's not counted as net worth. And, is not related to my allocation nor IPS though it is paid for.
How is home equity as a percentage of net worth actionable toward financial planning?
It is part of your net worth. Is someone that has $1 million in investments (no debt) in the same financial position as someone that has $1 million in investments (no debt) and a $500k paid off house? You may not count it as part of your retirement plan or assets, but the definition of net worth is pretty simple and universal.
I get the FI part but not the RE part of FIRE.
Re: What percentage of your net worth is your home equity?
10%
No mortgage.
Property is an asset and therefore part of my net worth.
No mortgage.
Property is an asset and therefore part of my net worth.
Re: What percentage of your net worth is your home equity?
39% paid off.
I can't believe people aren't counting their home in their net worth.
I suppose I will buy your house for 1 penny and increase your net worth for you, then.
I can't believe people aren't counting their home in their net worth.
I suppose I will buy your house for 1 penny and increase your net worth for you, then.
Last edited by pdavi21 on Tue Dec 11, 2018 4:31 pm, edited 1 time in total.
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Re: What percentage of your net worth is your home equity?
Retired, house paid off, in a VLCOL area (small town in the Southeast). In our case, it makes little difference whether we include home equity in our net worth, or not. Either way, it's about 5%, give or take a couple of 0.1%.
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Re: What percentage of your net worth is your home equity?
With the recent market correction, a little more.
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Re: What percentage of your net worth is your home equity?
I usually agree with you, but I don't know how to interpret your comment.
Your home equity is definitely a part of your net worth, and counting it has nothing to do with whether you believe you have "too much house."
Whether or not you want to act on that equity during your investing career is up to you. But at the end of the day (at the end of your life), your home equity will factor into your estate planning, sometimes quite substantially.
If you own a house, it will definitely need to be disposed of somehow at sometime, and the size of the equity shouldn't be viewed judgmentally.
Re: What percentage of your net worth is your home equity?
Technically, the equity in our two homes is a bit less than 31% of our net worth.
But looking ahead for finances in retirement, I don't count that equity as part of our portfolio. We are completely covered financially without it.
We are planning to sell our primary residence and move into our secondary home full time next year. At that time I'll need to decide what to do with the proceeds of that paid-off house. Currently, I plan to invest it rather than pay off the mortgage on the other home. Depending on the economy next year, that plan could change.
Either way, the percentage of our net worth tied up in home equity will change drastically for us at that point in time.
But looking ahead for finances in retirement, I don't count that equity as part of our portfolio. We are completely covered financially without it.
We are planning to sell our primary residence and move into our secondary home full time next year. At that time I'll need to decide what to do with the proceeds of that paid-off house. Currently, I plan to invest it rather than pay off the mortgage on the other home. Depending on the economy next year, that plan could change.
Either way, the percentage of our net worth tied up in home equity will change drastically for us at that point in time.
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Re: What percentage of your net worth is your home equity?
I would say it is hard to make this meaningful. There are so many factors... and reasons. For the purpose of the exercise mine is 8% and the home is paid for.
Re: What percentage of your net worth is your home equity?
Net worth is simply a measurement of wealth. It's what you own, less what you owe. That's it by definition. Beyond that, we should call things what they are: investable assets, stocks, cash, real estate, cars, ratio of real estate equity to the rest of one's net worth (the OP's question), etc.
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Re: What percentage of your net worth is your home equity?
Good thing you’re not an accountant-you would be censured for failing to adhere to GAAP.
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Re: What percentage of your net worth is your home equity?
I’m sure ponyboy didn’t mean to include you. In fairness, it is common for young people, with little savings and just starting out, to count their home equity as a way to make themselves feel better; it’s easier to show progress in their financial journey.ResearchMed wrote: ↑Tue Dec 11, 2018 4:24 pm That makes us - and others like us - among the "lower savings/investments" group, who "need" the equity to "sound better"?
Really?
As another example of why it should be counted: we are in the process of investing roughly 50% of what we bought our house for, in improvements. I count that as a wash financially. Omitting home equity would count it as a significant loss. That doesn’t make sense.
I get the FI part but not the RE part of FIRE.
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Re: What percentage of your net worth is your home equity?
Before or after transaction costs of selling the home?
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Re: What percentage of your net worth is your home equity?
Our home equity is 17% of net worth and the remaining mortgage is about 15% of the home's estimated value. I closely follow the discussions on paying off mortgages early (ours is 3.5%), but I figure I'd be better served by maximizing tax-advantaged retirement savings (IRAs,401k, and NQ-DCP).
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Re: What percentage of your net worth is your home equity?
Only on Bogleheads are people rushing to pay off their mortgage to not count it in their net worth .
Last edited by michaeljc70 on Tue Dec 11, 2018 4:46 pm, edited 2 times in total.
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Re: What percentage of your net worth is your home equity?
+1. Totally agree, that says that a person with $500k in investments and rents, is equivalent in net worth to someone with $500k and a house worth $500k (no mortgage)...you've got to be kidding. I downsized last year from a HCOL and banked a goodly sum. Oh, about a third.
Last edited by tennisplyr on Wed Dec 12, 2018 6:37 am, edited 1 time in total.
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Re: What percentage of your net worth is your home equity?
About 5% in our case.
Tim
Tim
Re: What percentage of your net worth is your home equity?
Fourteen percent. We sold the older, bigger house that had a LOT of equity and down-sized.
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Re: What percentage of your net worth is your home equity?
13%. No mortgage.
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Re: What percentage of your net worth is your home equity?
Currently under 10%
Will be about 25% once we build our retirement home and sell the current one, hopefully summer 2019.
We don't count it as part of our portfolio, but obviously it is a part of our net worth.
Someday it might be needed to pay for one of our LTC.
Will be about 25% once we build our retirement home and sell the current one, hopefully summer 2019.
We don't count it as part of our portfolio, but obviously it is a part of our net worth.
Someday it might be needed to pay for one of our LTC.
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