Is a home an asset or liability?

[t-homo]

The way I have always been taught (by parents and as a finance major) an asset is something that will gain money for you and a liability is something that will lose you money.

[sherri_chickie]

I consider my home an asset. I would be paying just as much if not more for a rental unit and I did not buy more home that I need. The market here for the type of home I own is not dropping, and I am not house poor.

[pauldun170]

Lets revisit your question is a home an asset or liability.

Lets say I bought my house cash.
What happens to your question?

What happens in the case where the value of the home exceeds the debt obligation?
what happens to the extra?

[fasternyou929]

Originally Posted by t-rock

Is a home an asset or liability?

Originally Posted by t-rock

Why do you consider the house an asset though? Because the price of it goes up over the years you live there? (ignore housing price crash)

It could be either really, but it's an asset by definition.

And the value of the asset is current market price less your current mortgage payoff. If that gives you a negative number your house has become a liability, which will become painfully evident should you need to relocate.

[t-homo]

For the typical american. Bought the house at market value on a 15 - 30 year loan at 4.5 percent interest (estimated average mortgage rate).

[Homeslice]

An asset is simply something you own that has value. Whether it succeeds in making you any money is irrelevant.

[anthonyk]

Huh, I always figured an asset was something I could turn into money, and a liability was something that it'd take money to get rid of.

Edit: Oh, and whatever way you look at it, my house is currently making me money.

[t-homo]

Originally Posted by fasternyou929

It could be either really, but it's an asset by definition.

And the value of the asset is current market price less your current mortgage payoff. If that gives you a negative number your house has become a liability, which will become painfully evident should you need to relocate.

What about the price of PMI, property taxes, upkeep, etc? Should they be factored into how much you pay for the home or neglected?

[pauldun170]

Originally Posted by t-rock

The way I have always been taught (by parents and as a finance major) an asset is something that will gain money for you and a liability is something that will lose you money.

Wrong

An asset is something that can be converted into cash or exchanged for something of value.

There is no promise of gain.

Liability is a debt obligation or whatever you are responsible for.


What are you a freshman?

[pauldun170]

Originally Posted by Homeslice

An asset is simply something you own. Whether it succeeds in making you any money is irrelevant.

In order for it to be an "asset" it has to be something you can exchange for something else of value.

Otherwise its just stuff.