You browsed your local real estate listing as if it was your second job. You hired a professional real estate agent. And now, after qualifying for a home mortgage and settling in, you’ve officially become a bonafide homeowner.
But with every four-figure payment that leaves your bank account each month, you start to wonder:
Is your house an asset? Or is it actually a liability?
If you’ve been living in your house while juggling your property taxes and your mortgage, you might have an argument for both. Keep reading for an answer to the question “Is a house an asset?”
What Is an Asset?
If you’ve ever been on either side of a job interview, chances are that you’ve heard or seen someone say some version of the words, “I’m sure that I’ll be an asset to your company.”.
But have you ever thought about what exactly that means?
In technical terms, an asset is an owned item that has current and/or future value. On a practical level, it can be in the form of cash in your bank account or of things you own like your car, your clothes, or your house. From a financial standpoint, it’s safe to say that houses are typically assets.
What Is a Liability?
Have you ever worked on a team with a coworker or a classmate who wasn’t pulling their weight? Have you ever gotten some money only to discover late that you needed to put the money towards other bills?
If someone or something is a net negative, they are said to be a liability. And in finance, if you owe money you’ve generally got a liability on your hands.
What this means is that even if your actual house is an asset, the money you owe on your mortgage is a net liability.
Is Your House an Asset or a Liability?
Your house is an item you own with a likely six-figure market value. It has income potential as a rental. And you can sell it here. When you put all of this together, it more than likely falls under the “asset” category.
However, because your mortgage is money that you owe, you do have a type of liability tied to your house. But as long as the value of your home is greater than the mortgage, the general answer to this question is “asset”.
Here’s Why Your House Is a Property Asset
On paper, your house is a form of property. And because of its value, it’s technically an asset even if you happen to co-own your house with the bank.
The answer to the question “Is your house an asset?” is “Yes.”. But you may have to remember that your mortgage and your home are two separate things.
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