Author Topic: Home equity as a percentage of net worth?  (Read 34571 times)

Gone Fishing

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Home equity as a percentage of net worth?
« on: May 28, 2015, 09:57:56 AM »
You often see a house referred to someone's largest asset.  I was doing a little math and was a little surprised at how little my home equity made up of my net worth (6.5%).  I've always considered home equity to be non-income producing and sought to maximize my investments by not prepaying my mortgage.  That combined with a smaller house to start with and my house is nowhere near my largest asset.  I'm guessing that this is not at all uncommon among mustachians, so what is your home equity as a percentage of your net worth?   

forummm

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Re: Home equity as a percentage of net worth?
« Reply #1 on: May 28, 2015, 10:03:55 AM »
If I just take the Zillow estimate, and don't include the cost of selling it, it's probably 3%. I have a very cheap house and a high mortgage balance.

arebelspy

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Re: Home equity as a percentage of net worth?
« Reply #2 on: May 28, 2015, 10:04:50 AM »
My primary residence is underwater, so it's a negative percent of my net worth. 

I count it in my net worth, but then it makes for funny situations like when a comparison is asking for net worth "excluding home equity" my number actually rises, instead of falling.  :P
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Re: Home equity as a percentage of net worth?
« Reply #3 on: May 28, 2015, 10:39:20 AM »
Always think it best to exclude it - at least from a SWR perspective, but FTR about 16%

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Re: Home equity as a percentage of net worth?
« Reply #4 on: May 28, 2015, 10:43:12 AM »
I don't consider my home equity when I look at my net worth; but if I do include it, mine is a significant chunk- about 30%. 

I can see how someone in a high cost of living area, especially if they bought a long time ago, and had it almost entirely paid down, would have a lot of their net worth in their home.

« Last Edit: May 28, 2015, 12:11:29 PM by iowajes »

Insanity

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Re: Home equity as a percentage of net worth?
« Reply #5 on: May 28, 2015, 10:52:36 AM »

I do factor it as part of our net worth as it does have a value associated with it.  Same as my car.   
While we are not underwater, the value has taken about a 10% hit over the last 6-10 months :/

FIreDrill

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Re: Home equity as a percentage of net worth?
« Reply #6 on: May 28, 2015, 10:53:14 AM »
I count home equity in our net worth.  Comes out to be about 18% of our NW.

sol

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Re: Home equity as a percentage of net worth?
« Reply #7 on: May 28, 2015, 10:56:19 AM »
About 8 percent.

fiveoh

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Re: Home equity as a percentage of net worth?
« Reply #8 on: May 28, 2015, 11:32:51 AM »
Around 40%.  I realize it's not really an investment but consider it the "real estate" portion of my portfolio since I have no rental homes, etc

Camarillo Brillo

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Re: Home equity as a percentage of net worth?
« Reply #9 on: May 28, 2015, 11:33:08 AM »
10%.

cautiouspessimist

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Re: Home equity as a percentage of net worth?
« Reply #10 on: May 28, 2015, 11:54:38 AM »
About 28%, but I'm still a beginner.

GuitarStv

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Re: Home equity as a percentage of net worth?
« Reply #11 on: May 28, 2015, 11:59:50 AM »
About 66-70%.  Our home has appreciated a lot since purchasing it, and we'll be finished paying it off next year.

Ottawa

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Re: Home equity as a percentage of net worth?
« Reply #12 on: May 28, 2015, 12:21:40 PM »
About 28%.  Not including pension worth.  In which case...16%

brooklynguy

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Re: Home equity as a percentage of net worth?
« Reply #13 on: May 28, 2015, 12:58:40 PM »
You often see a house referred to someone's largest asset.

If you are trying to determine the applicability of this statement among mustachians, home equity seems to be the wrong metric (as you said, many of us intentionally carry disproportionately large mortgages relative to our ability to pay them off as compared to the general population).  Shouldn't you have asked about home value as a percentage of total assets?

sleepyguy

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Re: Home equity as a percentage of net worth?
« Reply #14 on: May 28, 2015, 01:04:14 PM »
60% or so.

thd7t

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Re: Home equity as a percentage of net worth?
« Reply #15 on: May 28, 2015, 01:08:26 PM »
about 35% and falling.

Gone Fishing

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Re: Home equity as a percentage of net worth?
« Reply #16 on: May 28, 2015, 01:16:46 PM »
You often see a house referred to someone's largest asset.

If you are trying to determine the applicability of this statement among mustachians, home equity seems to be the wrong metric (as you said, many of us intentionally carry disproportionately large mortgages relative to our ability to pay them off as compared to the general population).  Shouldn't you have asked about home value as a percentage of total assets?

Agreed, but I was more interested in % of net worth "deployed" in income producing assets vs home equity.  The often used statement simply led me to the posted question.  For clarity, feel free to add the words "net of debt" behind the word asset if you would like.
« Last Edit: May 28, 2015, 01:44:03 PM by So Close »

sisto

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Re: Home equity as a percentage of net worth?
« Reply #17 on: May 28, 2015, 01:24:05 PM »
This is an interesting topic. For me it's 12%.

TheAnonOne

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Re: Home equity as a percentage of net worth?
« Reply #18 on: May 28, 2015, 01:30:12 PM »
20-25% assuming Zillow is anywhere close to accurate... (120k)


I bought it for 73k and owe 69k after a refi added a bit back to the balance. If I assume no growth and sell it at what I bought it for...

.5% -> 1% or so. This is more accurate for me.


Assuming Zillow is correct, this is my fastest growing asset in terms of gains.

brooklynguy

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Re: Home equity as a percentage of net worth?
« Reply #19 on: May 28, 2015, 01:34:15 PM »
I was more interested in % of net worth "deployed" in income producing assets vs home equity

On its face, my home equity is probably about 60% of my net worth (even though I'm carrying close to the maximum amount of conforming mortgage possible, and my house is quite small), but it is a two-family property so it is partially an income-producing asset.  The rental income from the second unit covers a huge chunk of my non-mortgage expenses.

Personally, I prefer to just completely exclude home equity from my net worth calculation, because I have no plans to ever sell.  The rental income gets accounted for as a reduction of the expenses that need to be covered by my investment portfolio, and I mentally treat the portion of my home equity allocable to the portion of the house that my family and I occupy as just part of my unitemized safety margin (if the shit hits the fan, we can "downsize" to a cheaper location as a back-up plan of last resort).

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Re: Home equity as a percentage of net worth?
« Reply #20 on: May 28, 2015, 01:40:04 PM »
I just recently started tracking my net worth online and I do include the equity in my primary house in my net worth.  I think it makes sense to add it as it really is money you could have available if you sold it.

My primary house accounts for about 40% of my total net worth. 

Terrestrial

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Re: Home equity as a percentage of net worth?
« Reply #21 on: May 28, 2015, 02:06:24 PM »
We are around 25% right now and generally falling as we keep socking away more money and other investments gain value.  Projecting out to FIRE it would comprise about 15% of our N.W. with the house owned outright (paid off mortgage).

I include home equity (minus the theoretical cost to sell our home) in N.W. calc, even though we dont plan on selling it...especially for people with large downpayments this makes sense to me - the day we bought our house $90k went instantly from cash on hand to 'home equity'...but that monetary value didn't just completely disappear.   

Catbert

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Re: Home equity as a percentage of net worth?
« Reply #22 on: May 28, 2015, 02:19:08 PM »
About 20%.  I have a paid off house in a HCOL area.

ltt

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Re: Home equity as a percentage of net worth?
« Reply #23 on: May 28, 2015, 02:33:06 PM »
17%...no mortgage.

ozbeach

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Re: Home equity as a percentage of net worth?
« Reply #24 on: May 28, 2015, 02:37:41 PM »
40%, no mortgage. House prices here in Australia seem way higher than the US. I never count this when calculating FI, SWR etc.

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Re: Home equity as a percentage of net worth?
« Reply #25 on: May 28, 2015, 02:53:51 PM »
Primary residence equity is about 20% of my net worth.

Capsu78

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Re: Home equity as a percentage of net worth?
« Reply #26 on: May 28, 2015, 03:07:10 PM »
23% with a final payoff in the next 18 months.  (excludes any value in our pensions)

chubbybunny

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Re: Home equity as a percentage of net worth?
« Reply #27 on: May 28, 2015, 03:15:13 PM »
I have to admit, I've never actually calculated this before.  Here's mine.

5% primary residence
15% rental properties

brings my real estate equity to about 20% of my net worth.

Aussiegirl

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Re: Home equity as a percentage of net worth?
« Reply #28 on: May 28, 2015, 03:26:43 PM »
20% if included in NW calc, but I generally don't include it as it's not income generating. And certainly don't include it for SWR purposes.

We made the decision to pay off the house so we weren't playing a mortgage after RE.  Here in Oz fixed rates generally only go out 5 years max with the loan then converting to variable at the rate of the day (av loan rate over 20 years is about 7.5%).  And housing debt on primary residence is not tax deductible here.

AJ

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Re: Home equity as a percentage of net worth?
« Reply #29 on: May 28, 2015, 03:35:50 PM »
4.4%

I like to use Zillow minus 10%, because I figure I would lose 6% to a realtor, 3% to buyers closing costs, and 1% to misc repairs and closing costs if we sold it (and thankfully, Zillow is pretty accurate in our area.)

TheLazyMan

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Re: Home equity as a percentage of net worth?
« Reply #30 on: May 28, 2015, 04:11:58 PM »
Mine's about 12%

mancityfan

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Re: Home equity as a percentage of net worth?
« Reply #31 on: May 28, 2015, 04:22:24 PM »
25%. House is paid off. I do not include a future pension in my net worth.

Runner77

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Re: Home equity as a percentage of net worth?
« Reply #32 on: May 28, 2015, 04:43:29 PM »
20%, no mortgage.

EngineerMum

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Re: Home equity as a percentage of net worth?
« Reply #33 on: May 28, 2015, 05:08:38 PM »
Ours would be around 50%. At least. Housing is expensive here, and DH had bought this house before we met. For a whole host of reasons, it hasn't made sense to sell, but I've definitely been tempted. We have been very housepoor while we were a 1 income family, now that he has a job, it doesn't seem so dire.
Some of the percentages are phenomenal to me - the idea that you could own a house for less than 20% of net worth - assuming most people are not already multimillionaires - when the cheapest 1 bed apartment I can find in my city on a RE website search is over $200k. Even lots out on the urban fringe, the property report I get said that last week there was one lot sold for under $250k, while dozens sold for $500k +. That's just the lot, the house would be an extra few hundred k on top.
Regardless, until we have a huge property crash, assuming we stay in this city (where our families live, so likely) our house will be a significant percentage. I'd say at FIRE, it will probably still be 30%, or more if value continues to rise.

KungfuRabbit

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Re: Home equity as a percentage of net worth?
« Reply #34 on: May 28, 2015, 05:09:17 PM »
a little under 10% right now.

Your statement is correct however, i have known multiple people that put every dollar they own into their house down payment.  My one friend has no investments and credit card debt, but then like $40,000 in a house.  So for him 100%, and i am guessing that is a very significant part of the population. 

Spork

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Re: Home equity as a percentage of net worth?
« Reply #35 on: May 28, 2015, 05:12:23 PM »
18%, no mortgage. 

nobodyspecial

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Re: Home equity as a percentage of net worth?
« Reply #36 on: May 28, 2015, 05:21:28 PM »
Around 50%, paid off and the smallest/cheapest house we could find - but in an insane real-estate price city

AustralianMustachio

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Re: Home equity as a percentage of net worth?
« Reply #37 on: May 28, 2015, 05:30:54 PM »
Yes, this number is going to be quite skewed for Australians in comparison to Americans. Especially if they live in Sydney

http://www.realestate.com.au/invest/house-in-sydney,+nsw+2000

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Re: Home equity as a percentage of net worth?
« Reply #38 on: May 28, 2015, 05:39:25 PM »
Mine is 23% using Zillow.  No mortgage debt.

Be careful using Zillow.  I track my home value and net worth monthly and in mid 2014 my home value increased significantly for about 6 months then fell again.  If I now look at the historical trend on Zillow, it does not reflect the increase in 2014.  It is as if it never happened, but the values in my spreadsheet were recorded from the Zillow site the day I entered them.


Eric

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Re: Home equity as a percentage of net worth?
« Reply #39 on: May 28, 2015, 05:46:22 PM »
0% -- Only paper investments for me thankyouverymuch!

sol

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Re: Home equity as a percentage of net worth?
« Reply #40 on: May 28, 2015, 05:53:55 PM »
Some of the percentages are phenomenal to me - the idea that you could own a house for less than 20% of net worth

The question was about equity, not home value.  If you get a zero down mortgage your equity could be zero percent of a multi-million dollar net worth or a $1 net worth.

I'm my case, we bought a house for 20 percent down last year.  The home would sell today for about 30 percent of our net worth, but since our equity in it is less than the purchase price, we only have about 8 percent of our net worth tied up in it.  Would be six percent (20 percent of 30 percent) if we hadn't made any payments over the past year.

Be careful using Zillow.  I track my home value and net worth monthly and in mid 2014 my home value increased significantly for about 6 months then fell again.  If I now look at the historical trend on Zillow, it does not reflect the increase in 2014.

Zillow is constantly backwards adjusting its own former price estimates.  They usually stabilize after about a year, but the newest estimates are always a wild guess based on a small number of recent sales.  In every case I've seen, the newer numbers are too high and will eventually get revised down, which totally makes sense for their business model but is still annoying.

NaturallyHappier

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Re: Home equity as a percentage of net worth?
« Reply #41 on: May 28, 2015, 06:51:38 PM »
Some of the percentages are phenomenal to me - the idea that you could own a house for less than 20% of net worth

The question was about equity, not home value.  If you get a zero down mortgage your equity could be zero percent of a multi-million dollar net worth or a $1 net worth.

I'm my case, we bought a house for 20 percent down last year.  The home would sell today for about 30 percent of our net worth, but since our equity in it is less than the purchase price, we only have about 8 percent of our net worth tied up in it.  Would be six percent (20 percent of 30 percent) if we hadn't made any payments over the past year.

Be careful using Zillow.  I track my home value and net worth monthly and in mid 2014 my home value increased significantly for about 6 months then fell again.  If I now look at the historical trend on Zillow, it does not reflect the increase in 2014.

Zillow is constantly backwards adjusting its own former price estimates.  They usually stabilize after about a year, but the newest estimates are always a wild guess based on a small number of recent sales.  In every case I've seen, the newer numbers are too high and will eventually get revised down, which totally makes sense for their business model but is still annoying.

In my case the home is 25 years old and has not been on the market for 15 years, so I am not sure why they have crazy estimates.  Maybe some recent home sales in my area that were way above market....I am guessing.

bacchi

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Re: Home equity as a percentage of net worth?
« Reply #42 on: May 28, 2015, 07:00:10 PM »
About 15% and I've taken nearly $100k as cash-out.

CashFlowDiaries

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Re: Home equity as a percentage of net worth?
« Reply #43 on: May 28, 2015, 07:09:17 PM »
Mine is 23% using Zillow.  No mortgage debt.

Be careful using Zillow.  I track my home value and net worth monthly and in mid 2014 my home value increased significantly for about 6 months then fell again.  If I now look at the historical trend on Zillow, it does not reflect the increase in 2014.  It is as if it never happened, but the values in my spreadsheet were recorded from the Zillow site the day I entered them.

I hear zillow can be pretty accurate in some cities but for the most part its pretty far off in most cities. I wouldnt use zillow at all where I'm from.  The only way to get an actual estimate of what your home is worth is through actual MLS comparisons of recent houses sold in your neighborhood.

Spork

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Re: Home equity as a percentage of net worth?
« Reply #44 on: May 28, 2015, 07:14:07 PM »
Mine is 23% using Zillow.  No mortgage debt.

Be careful using Zillow.  I track my home value and net worth monthly and in mid 2014 my home value increased significantly for about 6 months then fell again.  If I now look at the historical trend on Zillow, it does not reflect the increase in 2014.  It is as if it never happened, but the values in my spreadsheet were recorded from the Zillow site the day I entered them.

I hear zillow can be pretty accurate in some cities but for the most part its pretty far off in most cities. I wouldnt use zillow at all where I'm from.  The only way to get an actual estimate of what your home is worth is through actual MLS comparisons of recent houses sold in your neighborhood.

They don't even notice that I have a house.  I'd say for me they're way off.

Caoineag

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Re: Home equity as a percentage of net worth?
« Reply #45 on: May 28, 2015, 08:25:01 PM »
50%, but if I based it off what I paid originally, the equity would only be 10% of my net worth. Rapid appreciation, 15 year mortgage and bought a short sale in a deeply distressed market means its almost rivaling my stocks on the gains. Course, my stocks required far less repairs for those gains so I still like them better as an investment.

earlyFI

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Re: Home equity as a percentage of net worth?
« Reply #46 on: May 28, 2015, 09:04:31 PM »
12% of Net worth
No mortgage
I Rent out a portion of my house. The monthly rent covers all my monthly/annual housing expenses (property taxes, repairs, insurance, utilities, Internet, water, sewer/garbage, and HOA fees.. Which include:  cable TV, swimming pool, lawn mowing, snow removal, etc.)
I also have a HELOC @ zero balance which can be used as a safety net or for short term loan at a low interest rate
« Last Edit: May 28, 2015, 09:11:55 PM by earlyFI »

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Home equity as a percentage of net worth?
« Reply #47 on: May 28, 2015, 10:05:11 PM »
We don't include home equity as part of our net worth but we own our primary residence and a rental property.

If I were to include the property equity (according to Zillow, which is reasonably accurate in our area) in our net worth, it would amount to 40% of the new net worth. Given the large amount of equity (6 figures) and our high COL in our area, we could FIRE immediately if we moved to a lower COL area.

Bateaux

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Re: Home equity as a percentage of net worth?
« Reply #48 on: May 28, 2015, 10:12:14 PM »
I personally think that home value shouldn't be included in net worth for income production calculations unless you make money from it.  We're debt free and real estate accounts for about 15 to 20 percent of our total net worth of about 1.6M

gooki

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Re: Home equity as a percentage of net worth?
« Reply #49 on: May 29, 2015, 03:47:25 AM »
80-90%

It is part of my net worth, but it's excluded when calculating a safe withdraw rate.