What Net Worth Includes
Net worth is calculated by subtracting your liabilities from your assets. Assets include cash, investments, retirement accounts, and property. Your home is typically listed as an asset at its current market value, while the remaining mortgage balance counts as a liability.
How Home Equity Contributes
Home equity is the portion of your home you actually own, calculated as market value minus the outstanding mortgage balance. As you pay down the loan and property values change, your equity can increase, directly boosting your net worth. You can estimate your home's value using online tools or a professional appraisal.
Why It Matters for Financial Planning
Including home equity in your net worth gives a clearer picture of your overall financial position. It helps track progress over time and can influence decisions about borrowing, retirement planning, or selling. For more details on calculating net worth, see the Consumer Financial Protection Bureau guide at https://www.consumerfinance.gov/consumer-tools/your-net-worth/.
