Comments on: Personal Residence: Asset or Liability

By: R C

R C — Wed, 27 Jan 2010 17:53:56 +0000

None of you get it. A house is a purchase and unless you pay cash (not borrowed cach) up front, you will always see red when selling. Look at the interest you have apaid over the life of your mortgage loan and you will be surprised at the thousands of dollars paid to the bank. You will not be able to recoup that kind of money. In this case the bank’s magic of compund interest takes away any real profit you can make from the sale of your home. No one adds in their interest payments to-date on their mortgage when they look at their selling price compared to what they bought their house for.

By: SOL

SOL — Sun, 14 Sep 2008 04:14:19 +0000

You house is an asset. The networth of the asset will of course depend on the existing liability on it….so I agree…pay the damn thing off ASAP. The question is, is it worth liquidating a non-rrsp mutual fund to pay off the mortgage or keep paying the mortgage and invest in the non-rrsp at the same time. This way you can increase your non-rrsp portfolio and gain some interest. Isn’t this how banks make money?

By: The obligatory “Is your house an asset or a liability” post - myinvestingblog.com

Fri, 12 Oct 2007 00:44:34 +0000

[...] LazyMan, Jim, Matthew, Smith Financial Place, MyMoneyBlog, Associated Content, FreeMoneyFinance, Canadian Capitalist, MoneyMonk, Crazy Engineer, Yahoo!, Watson Inc, Project Senso, Google Forum, just to name a [...]

By: Julie Ali

Julie Ali — Sat, 24 Jun 2006 03:31:07 +0000

A house with a mortgage is definitely a liability. Currently, it is difficult to buy a new house in Alberta for under $300,000. Even with a 25% downpayment, you still have to take out a hefty mortgage. Although interest rates are low right now, they will probably go up. If you have both the husband and wife working to service this debt right now, what happens when interest rates go up and they can’t find the cash to pay for the mortgage payments, property taxes and insurance (they go up too)? The only thing left to do would be to put the thirteen and fourteen year old kids in the family to work at the local grocery chain to service the debt load associated with this asset. No, a house with a mortgage is definitely a liability and furthermore, this liability impairs your ability to save money, paydown other debts such as student loans and fully fund your retirement.

Renting may mean that you face increases in living costs without the benefits of having your personal home appreciating in value but so what? You can earn money in other ways other than dumping your cash into an illiquid “goldmine”. The only reason to buy a house is because you want one to live in – it is a home, not an asset.

To decrease the impact of this “asset” on your financial success, I would suggest the following:

a) first pay off all other debt (Credit card, personal loans, car loans, RRSP loans etc) before taking on a mortgage debt

b) have an emergency fund of $5000 (or more)

c) save 25% of the downpayment

d) pay the mortgage biweekly, overpay each biweekly payment, pay lump sum payments of the principal and pay the darn thing off in under 15 years.

The only way that a house, your personal abode, the place where you raise your family becomes an asset is if you own the house free and clear and sell it in the bubble market that is currently Calgary and downsize to a village in Nepal. Otherwise your asset is
not an asset for you and but is certainly a cash generating machine for your bank.

By: Ray

Ray — Tue, 04 Apr 2006 06:48:54 +0000

A paid home does generate income. The income is coming from you. From an accounting point of view, you’re both the landlord and the tenant. It’s good to seperate them to get a clearer picture of your incomes and expenditures.

My take is that my house is an asset.

By: DIY Finances » Blog Archive » The Asset with Liability Written All Over it

Thu, 30 Mar 2006 01:57:34 +0000

[...] There is quite the debate (Canadian Capitalist and InvestingIntelligently) going on about whether or not your primary residence is an asset or a liability. [...]

By: James

James — Thu, 30 Mar 2006 00:59:10 +0000

You’re right, I’m not calculating net worth in the true sense. Not sure how to classify it; I guess its the worth of my liquid and saleable assets since I can’t sell my house or car. Well I can, but it would be very counter productive since I’d have no place to live and no way to get to work.

I wouldn’t say they aren’t assets, an asset is anything that can be bought or sold for a price. Houses and cars definately fall into that category.

By: Investing Intelligently

Investing Intelligently — Wed, 29 Mar 2006 22:53:43 +0000

James: good point, you never said they weren’t assets, but you did say that you don’t include them in net worth calculations, which implies that either a) you don’t think they are assets or b) you are not actually calculating net worth but something different.

“Assets are great, but unless they produce income they don’t get me closer to retirement.”

An asset like a primary residence doesn’t always produce income and you are right it doesn’t really do much for you unless it is spewing out income or you are planning on selling it before dying. However paying down the mortgage liability does get you closer to retirement.

By: James

James — Wed, 29 Mar 2006 22:31:25 +0000

I never said they weren’t assets.

I also never said I would prefer a 100,000 apartment versus a $1 Mill home.

Assets are great, but unless they produce income they don’t get me closer to retirement.

Selling the home is not part of the equation. Thats a choice I can make once the mortgage is paid, after umpteen years of mortgage, taxes etc…

By: Canadian Capitalist

Canadian Capitalist — Wed, 29 Mar 2006 20:49:08 +0000

Hmmm. Required, I made almost the same comment on Dave’s site.