Posted on: 06th Oct, 2007 07:48 pm
Asset in simple terms which gets money in your pocket & Liability takes money out of pocket.
Now, for a house, we can rely on resale value but we have to keep in mind the inflation. But actually house take money out of your pocket, by mortgage pay, property taxes, insurances, maintainences, utilities expanse, etc.
So, house is Liability.
Now, for a house, we can rely on resale value but we have to keep in mind the inflation. But actually house take money out of your pocket, by mortgage pay, property taxes, insurances, maintainences, utilities expanse, etc.
So, house is Liability.
It can be either. It is a liability until it is paid for.
If a house appreciates enough through your ownership then you will make money and it is an asset. Plus typically a mortgage is paid off eventually and the house still has value so it is an asset.
But during the time you are paying if it depreciates it is a liability. Things like cars, mobile homes, boats, etc. depreciate very quickly so they are considered a liability because if you can't pay for them any more there is no way to pay them off by selling them at their current value.
Home ownership is not for everyone and the recent news in the US mortgage market has shown that to be a fact.
If a house appreciates enough through your ownership then you will make money and it is an asset. Plus typically a mortgage is paid off eventually and the house still has value so it is an asset.
But during the time you are paying if it depreciates it is a liability. Things like cars, mobile homes, boats, etc. depreciate very quickly so they are considered a liability because if you can't pay for them any more there is no way to pay them off by selling them at their current value.
Home ownership is not for everyone and the recent news in the US mortgage market has shown that to be a fact.
Guest and livinginnky,your viewpoint and suggestion are very valuable. i also intend to reseller the house for making money. according to your views, there are certainly something to be careful and this is risk, we should be carefully. though this is both a asset and a liability,but it is usually considered an asset, especially in a legal sense. it's worth more than you paid it is definitely considered an asset.
House is not a liability. Now, if you buy a home on mortgage, you will pay the mortgage for yourself and over the time you will gain equity. But if you rent a home then you will be paying fir the others. After a certain period of time, you will own the house but renting does not provide you that option. So a house is surely a asset for you :)
Let me explain Jonny,
A "house" is not a liability, a "home mortgage" is. Until a house is paid for it is still considered a liability which is the mortgage.
IF a house gains equity then it begins to be an asset. But consider where a lot of people are right now. They are behind on payments on a house that is worth less than what they owe. Do you think those folks consider their house an asset?
Also keep in mind that even when it does become an asset it is still not liquid. Meaning if you want to sell it you have to find a buyer. So just because you own a home worth say 1 million dollars doesn't mean you could spend that money, you have to sell it first.
A "house" is not a liability, a "home mortgage" is. Until a house is paid for it is still considered a liability which is the mortgage.
IF a house gains equity then it begins to be an asset. But consider where a lot of people are right now. They are behind on payments on a house that is worth less than what they owe. Do you think those folks consider their house an asset?
Also keep in mind that even when it does become an asset it is still not liquid. Meaning if you want to sell it you have to find a buyer. So just because you own a home worth say 1 million dollars doesn't mean you could spend that money, you have to sell it first.
I have got to quit clicking the links from my email. I forgot to log in again that was me directly above.
I also want to reiterate what I said before. I agree with all posters. A house itself should be an asset. A mortgage loan is a liability. It gets confusing because the line gets blurred being the fact how a mortgage ties to a home. Unlike unsecured loans a mortgage lender can come and take your home back this is why many consider it a liability.
I also want to reiterate what I said before. I agree with all posters. A house itself should be an asset. A mortgage loan is a liability. It gets confusing because the line gets blurred being the fact how a mortgage ties to a home. Unlike unsecured loans a mortgage lender can come and take your home back this is why many consider it a liability.
"It can be either. It is a liability until it is paid for."
That's right eric. A home is an asset if we can build up equity and for that we need to pay down any loan that is against it. It takes a lot of time and effrot to build up this asset and it gives a sense of financial security actually. If I have a home that is paid for, I wouldn't hesitate to cash the equity in it if i do need it at times of a crisis.
That's right eric. A home is an asset if we can build up equity and for that we need to pay down any loan that is against it. It takes a lot of time and effrot to build up this asset and it gives a sense of financial security actually. If I have a home that is paid for, I wouldn't hesitate to cash the equity in it if i do need it at times of a crisis.
Hi,
I think House is not a liability but the mortgage is surely a liability that you need to pay over a long period of time. And yes, that is also true that, although house is an asset but it does not provide you liquid money unless or until you sell it. But in spite of that, even if you are paying a mortgage loan you are still gaining equity but does renting provide you that opportunity?
I think House is not a liability but the mortgage is surely a liability that you need to pay over a long period of time. And yes, that is also true that, although house is an asset but it does not provide you liquid money unless or until you sell it. But in spite of that, even if you are paying a mortgage loan you are still gaining equity but does renting provide you that opportunity?
Absolutely not! Not to mention rent is increased every year by 2%. This is great for investors, bad for the tenant.
Renting is simply hazardous to your wealth. A mortgage is considered good debt.
Renting is simply hazardous to your wealth. A mortgage is considered good debt.
I know this is blasphemy to brokers and lenders here but renting can be better than buying a home. I do somewhat agree in the fact that there are very few situations where renting is better than buying. And let me clarify by adding renting is never better than owning, but that is a whole different conversation.
My opinion:
The poster is right- the home you live in normally takes money out of your pocket until resell and should be considered a liability. Even if you don't have a mortgage on the property you will have property taxes and insurance along with repairs and maintenance.
An asset is something that makes you money, so if you rent a portion of your home and and have positive cash flow then you can consider your home an asset.
Rental properties can be either an asset or liability- it all depends upon cash flow. If the renters don't pay, damage the property to the extent where repairs outweigh the income etc.- it is a liability. If you have good cash flow on a rental property then it is an asset.
If you noticed during my post I kept referencing CASH FLOW. Look at the cash flow for any possession and you can easily determine if it is an asset or liability. The only factor that makes this distinction difficult is the time factor. If you buy your house for $100k and make payment for 5-10 years, during that time it is a liability, if you then sell the property for a profit (say $200k after 5-10 years), then, and only then, does it become an asset (although one you no longer posses).
The poster is right- the home you live in normally takes money out of your pocket until resell and should be considered a liability. Even if you don't have a mortgage on the property you will have property taxes and insurance along with repairs and maintenance.
An asset is something that makes you money, so if you rent a portion of your home and and have positive cash flow then you can consider your home an asset.
Rental properties can be either an asset or liability- it all depends upon cash flow. If the renters don't pay, damage the property to the extent where repairs outweigh the income etc.- it is a liability. If you have good cash flow on a rental property then it is an asset.
If you noticed during my post I kept referencing CASH FLOW. Look at the cash flow for any possession and you can easily determine if it is an asset or liability. The only factor that makes this distinction difficult is the time factor. If you buy your house for $100k and make payment for 5-10 years, during that time it is a liability, if you then sell the property for a profit (say $200k after 5-10 years), then, and only then, does it become an asset (although one you no longer posses).
Hi James,
What an explanation! Indeed, a house can be a liability as well as asset depending upon whether you pay for it or whether it provides you with cash flow. So, the cash flow, or should I say, the postive cash flow is something that decides whether it's an asset or liability.
good luck
What an explanation! Indeed, a house can be a liability as well as asset depending upon whether you pay for it or whether it provides you with cash flow. So, the cash flow, or should I say, the postive cash flow is something that decides whether it's an asset or liability.
good luck
So, isn't it true that all mortgages held by the lender are also considered liabilities? Indeed!
Hello,
Making monthly mortgage payments is a liability but once there is enough equity in your house, it is an asset.
I guess it is far more better to pay mortgage than paying rent because the former ultimately leads to building up equity and prepares for a steady source of cash flow.
Making monthly mortgage payments is a liability but once there is enough equity in your house, it is an asset.
I guess it is far more better to pay mortgage than paying rent because the former ultimately leads to building up equity and prepares for a steady source of cash flow.