Asset or Liability? Here’s Where Your Home Falls on the Ledger - Amplify (2024)

February 9, 2023


Asset or Liability? Here’s Where Your Home Falls on the Ledger - Amplify (1)

For many Americans, their home is the largest purchase they will ever make. This can lead prospective homebuyers to be anxious about the debt they will accrue. What matters more to your financial well-being: the positive value of your home or the negative value of your mortgage?

First, it’s important to understand the textbook differences between assets and liabilities.In simple financial terms, anassetis anything that can be owned that can also provide value for the owner. Since you have the option of reselling your house or converting it to a rental property, most people assume that their house is treated entirely as an asset.

But there’s also the balance of your mortgage to consider. In more simple financial terms, aliabilityis something owed. This often takes the form of a debt that needs to be repaid or a financial obligation, including loans andmortgages. Since homeowners carry mortgages on their home, some fear that a home might actually be treated as a liability. Given these simple definitions, it can be easy to see why deciding if a home is an asset or a liability can be confusing.

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The good news? Your home falls in the asset category even if you have not paid it entirely off. Thevalue assigned to your homecan be the amount you paid to purchase it, the taxable value or the current market value based on how other houses are selling in your neighborhood. This means you could potentially sell your house and receive the financial benefits, regardless of how that monetary value is determined.

Some say that since homes regularly require spending money to maintain them, this makes them a liability at all times — even if the house is owned outright. On the other hand, unlike a rental property, the value of your home can actually increase over time as the market grows. Given the financial definitions of asset and liability, a home still falls into the asset category. Therefore, it’s always important to think of your home and your mortgage as two separate entities (an asset and a liability, respectively).

Finally, yourhouse is your home. If you are purchasing a house to live in, it is more important to think about finding what’s best for you and what makes you happy. Trying to make your home also work as an investment can get complicated. Remember that it is serving the purpose of being your home. If it happens to increase in value over time, great. But the more likely scenario is that even if it does increase in value, you will continue to spend money on repairs and improvements.

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Asset or Liability? Here’s Where Your Home Falls on the Ledger - Amplify (2)

Asset or Liability? Here’s Where Your Home Falls on the Ledger - Amplify (2024)


What are examples of assets and liabilities? ›

Some examples of assets are cash, cash equivalents, patents, trademarks, and machinery, while some examples of liabilities are debt, borrowings, taxes, and overdrafts.

Does property count as an asset? ›

An asset is anything you own that adds financial value, as opposed to a liability, which is money you owe. Examples of personal assets include: Your home. Other property, such as a rental house or commercial property.

What is the asset of my house? ›

The difference between assets and liabilities is your net worth. Usually, your house is worth more than your mortgage, and that difference adds to your net worth. You would include you home value as an asset and your mortgage as a liability - the difference between these two numbers would be your equity.

What are the liabilities in a ledger? ›

A liability account is a general ledger account in which a company records the following which resulted from business transactions: Amounts owed to suppliers for goods and services received on credit. Principal amounts owed to banks and other lenders for borrowed funds.

What are household assets and liabilities? ›

Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more. Debt refers to home mortgage loans, education loans, credit card balances, and any other loan or credit extended to the household.

What is an example of a personal asset vs liability? ›

Assets include the value of securities and funds held in checking or savings accounts, retirement account balances, trading accounts, and real estate. Liabilities include any debts the individual may have including personal loans, credit cards, student loans, unpaid taxes, and mortgages.

How to use your house as an asset? ›

Here are five ways to get a net positive income from your home by turning it into an asset.
  1. Earn Rental Income from It. ...
  2. Borrow on Your House Equity. ...
  3. Go For a Business From Home. ...
  4. Start a Yard or Garage Sale. ...
  5. Have a Garden, Save on Food. ...
  6. Some Final Words.
Nov 13, 2019

Why is your home not an asset? ›

An Asset Provides Income

These assets either pay dividends/interest or spin off cash from operations that end up in your pocket. Your home, however, does just the opposite. Rather than generating income, it costs you money through mortgage payments, property taxes, maintenance, utilities, and other expenses.

When can a house be an asset? ›

In sum, mortgage-financed housing wealth may be an asset for some higher-wealth households, who gain from its use as a hedge against long-term care cost risk. It may be a liability for others, though, especially minority households.

What is not an asset? ›

While an asset is something with economic value that's owned or controlled by a person or company, a liability is something that is owed by a person or company. A liability could be a loan, taxes payable, or accounts payable.

What is the difference between an asset and a property? ›

Property is anything that can be owned, such as a house or claims to a resource (which includes land). In contrast, an asset is anything worth something. Unlike property, assets don't have to be tangible objects that you physically own. For example, stocks and bonds are considered assets.

What is proof of assets? ›

In most instances, you'll need to provide documents to show proof of assets. The specific documents you need will depend on the type of asset, but brokerage statements and bank statements are commonly used to show proof of assets.

What are 3 liabilities? ›

Liabilities can be classified into three categories: current, non-current and contingent.

Does a ledger only contain assets and liabilities? ›

A general ledger is an accounting record of all financial transactions in your business. This includes debits (money leaving your business) and credits (money coming into your business). These transactions can occur across areas such as revenue, expenses, assets and liabilities.

What are assets vs liabilities? ›

Assets represent the resources your business owns and that help generate revenue. Liabilities are considered the debt or financial obligations owed to other parties. Equity is the owner's interest in the company. As a general rule, assets should equal liabilities plus equity.

What are 10 liabilities? ›

Accounts payable, notes payable, accrued expenses, long-term debt, deferred revenue, unearned revenue, contingent liabilities, lease obligations, pension liabilities, and income taxes payable are the ten types of liabilities in accounting that provide information about a company's financial obligations and ...

What are some examples of assets? ›

What Are Examples of Assets? Personal assets can include a home, land, financial securities, jewelry, artwork, gold and silver, or your checking account. Business assets can include such things as motor vehicles, buildings, machinery, equipment, cash, and accounts receivable.

What are considered assets? ›

Assets are things you own that have value. Assets can include things like property, cash, investments, jewelry, art and collectibles. Liabilities are things that are owed, like debts. Liabilities can include things like student loans, auto loans, mortgages and credit card debt.


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