How should a mortgage be recorded in the net worth calculation?
Answers
2185 points
readytoretire answered 8 months ago …
Normally, you would show the equity in the house. If you want, you can include the total value as an asset and the mortgage as a liability. If you have the unfortunate privilege of being upside down in the house, you could just show the negative amount.
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952 points
rvilmur answered 8 months ago …
A mortgage needs to be subtracted from your net worth and the interest you pay each month will continue to reduce your net worth. You then can add back any part of the mortgage payment that reduces the amount of the mortgage, usually a small amount in the early years of the mortgage. If the selling value of the house is less than your mortgage, you are effectively renting your home from the mortgage company.
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1902 points
alanj answered 8 months ago …
The part of the principle of the mortgage that has been paid down would be recorded as net worth. This can be determined by using an amortization schedule.
If the value of your property has changed since you bought it, it would be best to get an official appraisal from a licensed appraiser. Or find out what other properies of similar types, style, age close by in the same or similar neighborhood have recently sold for. ( Don't use foreclosure sales, only retail sales.)
