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Net Worth Formula Including Home Equity:
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Net worth is a comprehensive measure of an individual's financial health, calculated as total assets minus total liabilities. Home equity (the difference between your home's market value and your mortgage balance) is a significant component of net worth for most homeowners.
The calculator uses the net worth formula including home equity:
Where:
Explanation: The formula calculates home equity (V - B) first, then adds other assets and subtracts other liabilities to determine total net worth.
Details: Calculating net worth including home equity provides a complete picture of financial standing. It helps track financial progress, make informed decisions about borrowing and investing, and plan for long-term goals like retirement.
Tips: Enter current market value of your home, outstanding mortgage balance, total value of other assets (investments, savings, vehicles), and total of other liabilities (loans, credit card debt). Use accurate, up-to-date values for best results.
Q1: Is home equity really part of net worth?
A: Yes, home equity is a legitimate asset and should be included in net worth calculations, though it's less liquid than cash or investments.
Q2: Should I use market value or purchase price for home value?
A: Use current market value for accurate net worth calculation, as this reflects the true value you could realize if you sold the property.
Q3: What other assets should be included?
A: Include savings accounts, investments, retirement accounts, vehicles, valuable personal property, and any other assets of significant value.
Q4: What liabilities should be included?
A: Include all debts: car loans, student loans, credit card balances, personal loans, and any other outstanding obligations.
Q5: How often should I calculate my net worth?
A: Ideally quarterly or annually to track financial progress and make adjustments to your financial strategy as needed.