Your Home Equity / Net Worth Ratio?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Flashes1
Posts: 1431
Joined: Wed May 07, 2008 7:43 am

Re: Your Home Equity / Net Worth Ratio?

Post by Flashes1 »

1. 25%

2. We've been paying about $1k extra month towards principle....mortgage will hopefully be paid off in 20 years when it's time for me to retire.
Zytos
Posts: 30
Joined: Mon Sep 24, 2012 11:47 am

Re: Your Home Equity / Net Worth Ratio?

Post by Zytos »

1. 37% (Long Island, NY)
2. No. Probably around 24-25 years to go.
ks289
Posts: 655
Joined: Sun Mar 11, 2012 12:42 pm

Re: Your Home Equity / Net Worth Ratio?

Post by ks289 »

27% :?:

No :|
User avatar
ofcmetz
Posts: 2465
Joined: Tue Feb 08, 2011 7:09 pm
Location: Louisiana

Re: Your Home Equity / Net Worth Ratio?

Post by ofcmetz »

1. 25%

2. No. Less than 12 years to go.
Never underestimate the power of the force of low cost index funds.
User avatar
Blister
Posts: 240
Joined: Fri Feb 17, 2012 7:59 am
Location: Tennessee

Re: Your Home Equity / Net Worth Ratio?

Post by Blister »

17%

yes

22%
Everthing works out in the end. If it doesn't then its not the end.
rr2
Posts: 1071
Joined: Wed Nov 19, 2008 9:04 pm

Re: Your Home Equity / Net Worth Ratio?

Post by rr2 »

1. About 15%

2. No. Just refinanced last year to to 30 year fixed, but paying extra to be done in about 22 years.
kamo
Posts: 94
Joined: Thu Dec 06, 2007 1:16 am

Re: Your Home Equity / Net Worth Ratio?

Post by kamo »

1. 8.5%

2. No
He who knows he has enough is rich. Lao-Tzu
Dadarkar
Posts: 161
Joined: Tue May 22, 2007 9:23 pm

Re: Your Home Equity / Net Worth Ratio?

Post by Dadarkar »

1. 26%
2. yes
3. 30%
User avatar
jeffyscott
Posts: 13484
Joined: Tue Feb 27, 2007 8:12 am

Re: Your Home Equity / Net Worth Ratio?

Post by jeffyscott »

1. about 17%

2. Yes

3. about 40% (paid off about 9 years ago, home value is about the same now as it was then)
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: Your Home Equity / Net Worth Ratio?

Post by harikaried »

I'm somewhat confused with what this is trying to get at or learn. Is this looking at diversification of one's net worth, so one doesn't put too much of one's net worth into a single asset/home equity?
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Your Home Equity / Net Worth Ratio?

Post by Grt2bOutdoors »

harikaried wrote:I'm somewhat confused with what this is trying to get at or learn. Is this looking at diversification of one's net worth, so one doesn't put too much of one's net worth into a single asset/home equity?
I think the OP is trying to figure out just how much Bogleheads are worth. :confused
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
acegolfer
Posts: 3029
Joined: Tue Aug 25, 2009 9:40 am

Re: Your Home Equity / Net Worth Ratio?

Post by acegolfer »

harikaried wrote:I'm somewhat confused with what this is trying to get at or learn. Is this looking at diversification of one's net worth, so one doesn't put too much of one's net worth into a single asset/home equity?
Right on.

There are many threads discussing whether to pay off mortgage or not. Most of the advice focused on the opportunity cost argument. But I believe asset allocation is something one should also consider. Wanted to get some empirical data from fellow bogleheads.
wesleymouch
Posts: 237
Joined: Wed Dec 05, 2012 1:24 pm

Re: Your Home Equity / Net Worth Ratio?

Post by wesleymouch »

8% for us. A house is just a big consumer good which you "rent" from the government via property taxes.
User avatar
G12
Posts: 1598
Joined: Mon Apr 16, 2007 2:35 pm

Re: Your Home Equity / Net Worth Ratio?

Post by G12 »

1) 11%
2) Yes, although it was a home equity line at the time
3) too similar to make a difference
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: Your Home Equity / Net Worth Ratio?

Post by harikaried »

acegolfer wrote:There are many threads discussing whether to pay off mortgage or not.
Okay, originally I had an example in my previous comment:

If someone had $100k cash and decided to buy a $100k house with a $80k loan, equity = $20k, net worth = $100k, ratio = 20%. But then if one pays off that loan immediately, equity = $100k, net worth = $100k, ratio = 100%, i.e., shifting all assets into home equity.

Doing a quick glance at the responses, it seems like people feel comfortable with 20-30% net worth being home equity when paying off a mortgage. So perhaps when making extra principal payments, be aggressive in lowering the debt but not so much that you shift too much of your assets into the home.
Topic Author
acegolfer
Posts: 3029
Joined: Tue Aug 25, 2009 9:40 am

Re: Your Home Equity / Net Worth Ratio?

Post by acegolfer »

harikaried wrote:
acegolfer wrote:There are many threads discussing whether to pay off mortgage or not.
Okay, originally I had an example in my previous comment:

If someone had $100k cash and decided to buy a $100k house with a $80k loan, equity = $20k, net worth = $100k, ratio = 20%. But then if one pays off that loan immediately, equity = $100k, net worth = $100k, ratio = 100%, i.e., shifting all assets into home equity.

Doing a quick glance at the responses, it seems like people feel comfortable with 20-30% net worth being home equity when paying off a mortgage. So perhaps when making extra principal payments, be aggressive in lowering the debt but not so much that you shift too much of your assets into the home.
Exactly.

I was surprised to see the 20-30% ratio when other BH paid off their mortgage. My initial guess would have been around 40%. It seems that BH really like to invest a lot of their net worth in financial assets. Great stuff!
User avatar
Peter Foley
Posts: 5533
Joined: Fri Nov 23, 2007 9:34 am
Location: Lake Wobegon

Re: Your Home Equity / Net Worth Ratio?

Post by Peter Foley »

acegolfer

So are you planning to do any analysis based on the responses? In scanning the responses I was unable to gain any insight into what such a ratio might mean; too many other variables and a host of unknowns.
Topic Author
acegolfer
Posts: 3029
Joined: Tue Aug 25, 2009 9:40 am

Re: Your Home Equity / Net Worth Ratio?

Post by acegolfer »

Peter Foley wrote:acegolfer

So are you planning to do any analysis based on the responses? In scanning the responses I was unable to gain any insight into what such a ratio might mean; too many other variables and a host of unknowns.
I agree. To be able to do any analysis, I will need more personal information such as age, actual $ net worth. I just asked questions that are not too intrusive. I bet some may think even the OP questions are too personal.

From the responses, I can say

1. BHs don't put all the net worth in one asset.
2. Many BHs have paid off mortgage.

What else have you found?
DrPeppaPig
Posts: 23
Joined: Sun Mar 10, 2013 1:38 pm

Re: Your Home Equity / Net Worth Ratio?

Post by DrPeppaPig »

1 - 20%
2 - No
icefr
Posts: 613
Joined: Sun Apr 17, 2011 10:50 am

Re: Your Home Equity / Net Worth Ratio?

Post by icefr »

1. 46%
2. Not yet, but should do so within 5-6 years.
3. I expect it to go up to about 55% by the time I pay it off.
savetoinvest
Posts: 10
Joined: Fri Jun 05, 2015 9:16 pm

Re: Your Home Equity / Net Worth Ratio?

Post by savetoinvest »

acegolfer wrote:
harikaried wrote:I'm somewhat confused with what this is trying to get at or learn. Is this looking at diversification of one's net worth, so one doesn't put too much of one's net worth into a single asset/home equity?
Right on.

There are many threads discussing whether to pay off mortgage or not. Most of the advice focused on the opportunity cost argument. But I believe asset allocation is something one should also consider. Wanted to get some empirical data from fellow bogleheads.
Fully support the idea of asset allocation argument. Unfortunately you are not asking the target allocation along with how much portfolio is in low-risk/fixed income.

Playing along..
1. 30%
2. no.
User avatar
Uncle Pennybags
Posts: 1835
Joined: Tue Oct 28, 2014 2:05 am

Re: Your Home Equity / Net Worth Ratio?

Post by Uncle Pennybags »

1. 36%

2. Yes

3. 100%

Paid off 6 years ago. I had a negative net worth at that time.

Edit from 57% to 36%, I forgot to add in the value of my home to the denominator. :oops:
Last edited by Uncle Pennybags on Fri Jun 05, 2015 11:31 pm, edited 1 time in total.
wander
Posts: 4424
Joined: Sat Oct 04, 2008 9:10 am

Re: Your Home Equity / Net Worth Ratio?

Post by wander »

1. Less than 10%
2. Yes
3. Less than 20%.
Carefreeap
Posts: 3899
Joined: Tue Jan 13, 2015 6:36 pm
Location: SF Bay Area

Re: Your Home Equity / Net Worth Ratio?

Post by Carefreeap »

Today about 20%. Maybe higher if you actually believe today's values. Yes, I believe a correction is coming very soon.

Yes house is paid off.

At the time we paid off the mortgage (2010) it was probably around 25%.

The interesting thing to note here is how the values changed from 2010 to 2015; almost 50%.
Every day I can hike is a good day.
User avatar
snackdog
Posts: 3102
Joined: Wed Nov 12, 2014 3:57 am
Location: PNW

Re: Your Home Equity / Net Worth Ratio?

Post by snackdog »

Most people will start with zero home equity and possibly negative net worth. Then they will save and put a down payment giving them equity, but still possibly negative net worth. As they save and build equity it will rise from 0% to some maximum, maybe worst case 50%. Then, they will save and savings will overtake equity. Eventually equity will fall to 5-15% of net worth. If you spend all your cash, your home equity might be 100% of your net worth. Then you take a home equity loan and start spending. Equity falls to 10% of net worth as you spend it all up on nursing home costs.

So what?
BH Consumer FAQ: | Car? Used Toyota, Lexus or Miata. | House? 20% down and 3x salary. | Vacation house? No. | Umbrella? $1 million. | Goods? Costco.
SQRT
Posts: 1792
Joined: Sat Feb 05, 2011 8:44 am

Re: Your Home Equity / Net Worth Ratio?

Post by SQRT »

About 20%

No mortgages, repaid before we retired.

This has been an issue for us as we bought 2 "vacation type" properties after retirement and were concerned about having too much RE. The ratio of RE to total assets will be constrained by the availability of cash flow to maintain such properties. I think something around 20-25% might be maximum comfortable equilibrium in retirement if you value all sources of cash flow, eg pensions and SS.
User avatar
xystici
Posts: 320
Joined: Thu Nov 19, 2009 3:40 pm
Location: San Diego, Boston & Barcelona

Re: Your Home Equity / Net Worth Ratio?

Post by xystici »

1. 28.6% as of today
2. yes
3. 66.4% as of Feb. 2009
Trust yourself, Break the rules, Don't be afraid to fail, Don't listen to naysayers, Work your butt off. "It is in your moments of decision that your destiny is shaped. Choose now and well"
Qprkid
Posts: 23
Joined: Sat Jun 04, 2011 11:05 pm

Re: Your Home Equity / Net Worth Ratio?

Post by Qprkid »

1) 49%, two homes
2) Yes on Primary(last year), No on Secondary
3) Estimating 55%
User avatar
Hawaiishrimp
Posts: 501
Joined: Tue Apr 14, 2015 4:13 am

Re: Your Home Equity / Net Worth Ratio?

Post by Hawaiishrimp »

1) 26%

2) No
I save and invest my money, so money can make money for me, so I don't have to make money eventually.
DFrank
Posts: 474
Joined: Thu Mar 20, 2014 10:44 pm
Location: North Idaho

Re: Your Home Equity / Net Worth Ratio?

Post by DFrank »

1. 22%

2. See below.

3. 23%

We own two homes, our current residence, and our retirement home. Figures above represent the equity in both homes. There is no mortgage on the retirement home, and equity in our current residence will become retirement savings in about a year when we retire. We just about had our current home paid for when we bought the second home, and refinanced it to buy the second home.
Dave
Netherworld
Posts: 32
Joined: Sat Jan 10, 2015 4:28 pm

Re: Your Home Equity / Net Worth Ratio?

Post by Netherworld »

20%
Yes (20140
20%
User avatar
JDCarpenter
Posts: 1800
Joined: Tue Sep 09, 2014 2:42 pm

Re: Your Home Equity / Net Worth Ratio?

Post by JDCarpenter »

1. 7%

2. No. (3.25% interest rate; if paid off, house = 12% of N.W.)
Our personal blog (no ads) of why we saved/invested: https://www.lisajtravels.com/
User avatar
vitaflo
Posts: 1905
Joined: Sat Sep 03, 2011 3:02 pm

Re: Your Home Equity / Net Worth Ratio?

Post by vitaflo »

11%
no
User avatar
mickeyd
Posts: 4898
Joined: Fri Feb 23, 2007 2:19 pm
Location: Deep in the Heart of South Texas

Re: Your Home Equity / Net Worth Ratio?

Post by mickeyd »

1. <10%
2. yes
3. SWAG 25%
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
Gronnie
Posts: 339
Joined: Sun Oct 19, 2014 2:08 pm

Re: Your Home Equity / Net Worth Ratio?

Post by Gronnie »

1. Infinite (home equity - student loan balance = negative number)
2. No - 11+ years to go on 15 year fixed mortgage at 2.75%
SunnySeattle
Posts: 52
Joined: Mon Nov 04, 2013 11:17 am
Location: Seattle

Re: Your Home Equity / Net Worth Ratio?

Post by SunnySeattle »

edited
8-)
Last edited by SunnySeattle on Fri Jan 06, 2017 10:45 pm, edited 1 time in total.
renue74
Posts: 1893
Joined: Tue Apr 07, 2015 7:24 pm

Re: Your Home Equity / Net Worth Ratio?

Post by renue74 »

1. 7%

2. No

We bought our home in 2002 near Charlotte, NC. Housing bubble wasn't as big as other places, plus I sold a mobile app business recently that increased our net worth by 5x.

We'll pay off our home in the next 5 years...by the time I'm 46. The master bedroom is not on the main floor, so I assume this won't be our last home, but I'm definitely not in the market to buy right now. #sellersmarket
2comma
Posts: 1241
Joined: Thu Jul 15, 2010 11:37 pm

Re: Your Home Equity / Net Worth Ratio?

Post by 2comma »

10%
Yes
12%
If I am stupid I will pay.
Ignatious P. Daily
Posts: 160
Joined: Thu Oct 09, 2014 3:11 pm

Re: Your Home Equity / Net Worth Ratio?

Post by Ignatious P. Daily »

1: 60%

2: Yes

3: 66%

We bought our home for cash 6-months ago. I struggled with the decision to pay cash. I can say that I don't regret it for a second. It has been very liberating. I am turning 36 and my wife is 34. We now have free cash flow of ~$8k - $14k per month that we can redirect. We have some furniture to purchase near term and a fence to build (on a lake with small child), but after that we have no large planned expenses until the next car refresh (in like 7 years). We are planning for $1m in investments by age 40 and $2m by age 45 - after which I will likely leave corporate america, accept the cut to savings rate, and simply find low stress work to liability match from work income.

You cannot break down these decisions only by the numbers. I expected a stress and emotional benefit from buying cash, but I WAY underestimated their impact. From a quality of life perspective it was one of the best decisions we ever made.
User avatar
obgyn65
Posts: 770
Joined: Sun May 06, 2012 9:11 am

Re: Your Home Equity / Net Worth Ratio?

Post by obgyn65 »

1. Less than 5%
2. I paid my home cash.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell
German Expat
Moderator
Posts: 961
Joined: Fri Oct 16, 2009 10:49 pm

Re: Your Home Equity / Net Worth Ratio?

Post by German Expat »

Used to have 2 properties, sold the house last year, the Condo is now under contract. We did move to Switzerland.

Used to be 25% before we moved, then went down to 8%.

So the answers are now:

1. 0%
2. no

At my peak home equity (when buying the first house in Germany) many years ago the answer to 1. would have been 80%.
ubermax
Posts: 1888
Joined: Tue Feb 11, 2014 1:19 pm

Re: Your Home Equity / Net Worth Ratio?

Post by ubermax »

1. 3% ( use to be closer to 4% before condo prices declined in our area ; but it'll always be a guess until we sell it :happy )
2. No
Matt62
Posts: 33
Joined: Sat Feb 01, 2014 4:31 pm

Re: Your Home Equity / Net Worth Ratio?

Post by Matt62 »

1. 40%
2. Yes
3. 40%
aj44
Posts: 309
Joined: Sat May 10, 2014 11:22 am

Re: Your Home Equity / Net Worth Ratio?

Post by aj44 »

1. 15%

2. Yes

3. 24%
hadron
Posts: 69
Joined: Wed Aug 07, 2013 11:57 pm
Location: Big Apple

Re: Your Home Equity / Net Worth Ratio?

Post by hadron »

1. 25%
2. No
jucor
Posts: 417
Joined: Tue Jun 02, 2015 8:35 am

Re: Your Home Equity / Net Worth Ratio?

Post by jucor »

1. 15%
2. Yes
3. 18%
MrNewEngland
Posts: 807
Joined: Sun Sep 28, 2014 11:38 am

Re: Your Home Equity / Net Worth Ratio?

Post by MrNewEngland »

Very nice to see that no one is in the negative with their houses anymore. I wonder how different these numbers would look if it was asked in 2009.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Your Home Equity / Net Worth Ratio?

Post by KlangFool »

OP,

1) 9%

2) No.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Your Home Equity / Net Worth Ratio?

Post by KlangFool »

snackdog wrote:Most people will start with zero home equity and possibly negative net worth. Then they will save and put a down payment giving them equity, but still possibly negative net worth. As they save and build equity it will rise from 0% to some maximum, maybe worst case 50%. Then, they will save and savings will overtake equity. Eventually equity will fall to 5-15% of net worth. If you spend all your cash, your home equity might be 100% of your net worth. Then you take a home equity loan and start spending. Equity falls to 10% of net worth as you spend it all up on nursing home costs.

So what?
snackdog,

1) Most people are not Boglehead.

2) For example, I do not take this path at all.

A)I do not count the house as part of my net worth

B) I only buy house that is 1/3 to 1/4 of my total asset (not counting the house). If there is no house in that price range, I rent. And, I live in a HCOL area.

C) In my case, if I count the house as part of net worth, it will never exceed 25% even if I paid it off.

3) I never had negative net worth. When I graduated from college, I had 8K of savings.

You do not have to agree with me. But, not everyone follow the same path.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
wxz76
Posts: 109
Joined: Sat Jun 09, 2012 1:10 pm

Re: Your Home Equity / Net Worth Ratio?

Post by wxz76 »

1. 40%
2. Yes
3. 45%
Post Reply