Does Net Worth Include Your Home?

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Net worth tracks your wealth building progress so it’s important that your net worth be calculated accurately. Often there is confusion how home values affect net worth.

Does your net worth include your home? It should include the current value of your home less any amount of debt you have on your home.

There are a few details you’ll want to know about this, though. That’s what I’ll cover in this post.

Why to Include Your Home in Net Worth Calculations

It’s easy to see how this can be confusing, but if you don’t include your home in your net worth calculation, it will be wrong.

Just think if you own a home valued at $500,000 without a mortgage. Let’s say you have investments of $100,000 and no other marketable assets.

By including your home value in your net worth calculation, your net worth is $600,000.

But if you don’t include your home value in your net worth, your net worth drops to $100,000.

How to Include a Home with a Mortgage in Your Net Worth

If you have a home with a mortgage, you’ll show the value of your home as an asset.

Then you’ll show the amount you owe against your home as a liability.

For example, if you have a home with a value of $500,000 and a mortgage of $400,000, the result reflected in your net worth is a positive $100,000.

Click here to read my related post How Much of My Net Worth Should Be in Cash.

How a HELOC Affects Home Value in Your Net Worth

If you have a HELOC (Home Equity Line of Credit) loan on your home, you’ll want to reduce the value of your home by the amount of the HELOC loan in addition to the mortgage. This is true even if you are not using the HELOC loan to update your home.

If you sold your home, you would have to pay off the HELOC first from the sale proceeds. The only way your net worth can be truly reflected is if you list any liabilities against it.

How to Include Your Home in Your Net Worth

Your net worth is obtained by listing all your assets, and then listing all your liabilities. You deduct your liabilities from your assets to know your net worth.

In non-financial lingo, assets are everything you own. Liabilities are everything you owe.

The document where you have included this information is called your personal balance sheet.

How Much Home Value Should You Include in Your Net Worth?

You may be wondering if you should include the purchase price you paid for your home, the tax value or the amount you would get when you sell your home in your net worth.

In order for your net worth to be current, you’ll want to include the amount you would get from the sale of your home.

Having the right home value in your net worth will give you good information to make smart strategic decisions about your wealth. For example, before you could even consider downsizing, you’ll want an updated net worth calculation with an accurate value.

Click here to read my related post Is Downsizing Right for Me?  

How to Know the Value of Your Home

Since our home is one of our largest single assets, I like to make sure it is reflected in our net worth correctly. Here is what I do.

I keep an eye out for homes sold in our neighborhood, sometimes going to open houses to see which homes are like ours in condition and age.

I use this in conjunction with the sales asking price per square foot to get an estimate of how much per square foot our home would bring in  a sale. There is also good after sale data online on redfin and other online real estate websites.

Location within the neighborhood, lot size and other factors are also considered in my estimated value per square foot.

I multiply this price per square foot estimate by the square footage of our home to get a good estimated home value to put in my net worth calculation.

Home Value Reductions

If you plan to use a real estate agent to sell your home, you’ll want to deduct this expense from the home value used in your net worth calculation.

To be more realistic, you’ll also want to reduce the home value by any other potential expenses, such as closing costs and concessions.

An old accounting rule is to be conservative in your estimates. We all tend to want to overstate net worth because we forget about some costs.

Plus, who doesn’t want as high a net worth as possible?

But it’s better to understate net worth than to overstate it.

Click here to read my related post How to Increase Net Worth.

Home Values in Net Worth for Accredited Investors

Sometimes in qualifying for an investment or financing, you need a certain level of net worth outside of your primary residence. An example of this is in qualifying as an accredited investor.

This is another reason many get confused about whether to include home values in net worth. In this example, you wouldn’t include your home value in assessing if you qualify as an accredited investor.

Liquid Assets Vs Illiquid Assets in Net Worth

Liquidity is another reason many get confused about whether to include a home in net worth.

Liquid assets are assets that can be sold immediately for cash.

While a home is not a liquid asset, it is an asset, so it definitely belongs in your net worth calculation since net worth includes both liquid and non-liquid assets.

Summary for Including Home in Net Worth Calculation

Now you know why it’s important to include your home in net worth calculations. You also have a strategy to adequately estimate the value of your home.


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The information on this website is for education only and is not to be construed as personal financial advice.