Accounting MascotAccounting Q&A

Is a house an asset or liability?
submitted by Shawn


A home is an asset, but your mortgage is a liability. Because a mortgage is debt, you need to pay it off before your home is really considered an asset.


It is an asset because it is your property.


An asset is anything with value that you own. However, we tend to think that because it has value that we can make money from it. That is not always the case--especially when it comes to a house.

Say, for example, that you buy a home for $200,000. It seems like it will be a good investment at the time, but shortly after your purchase the market drops significantly. Now the value of your home is closer to $140,000. Finishing the basement or renovating the kitchen will add value to your home, but will not help you earn back that entire $60,000. Now you're under water in your home, and it's beginning to feel like a liability. But, it's still technically an asset.(Anyone who bought a home during 2008 can relate to this example.)

Kent Perkins, CPA

By strict accounting definition, a home is an asset. It is something you own that has value. But, in reality, it is much more of a gray area than that.

Technically, when you buy a home you own it. But what if you bought a home for $180,000 and you still owe $160,000. Do you still feel like you own that house? What would happen to your home if you missed your mortgage payment for a few months? If you only paid half your mortgage, would you get to keep half the home? Absolutely not. The whole thing would belong to the bank. The reality of it is that the bank bought your home for you, because you couldn't afford it. Now you've got sort of a "rent to own" deal with them.

If you were to ask a group of investors, many of them would say a home is a liability. Investors look at assets as things that can earn you money. If you're living in your home, as opposed to renting it out, it's not really making you money. In fact, it's really a money pit. When a water heater breaks down or the roof needs to be replaced, you're losing money quickly. This thinking, of course, differs from the true accounting definition.

Here's an example that helps the accounting point of view make more sense. Person A (who is an investor) thinks that because a home doesn't earn you money, it's better to rent. Person A lives in a rental home. Person B (who is an accountant) understands that a home has value, even though it's not a source of income. Person B bought a home with a 15 year mortgage.

Now, flash forward 15 years. Person A is still paying rent. Person B doesn't pay any rent, and now owns a $170k home. If person B chooses to move to another home of equal or lesser value, he/she can sell the first house and pay cash for the second house. Person B will never pay rent again. One day, Person A learns that the landlord can no longer afford to pay the mortgage and is now forced to sell the home. Person A must now move because of another person's poor financial management.

This example represents the accountant's point of view, which is that a home has value. It may not present the short-term opportunity that many investors want, but it does make financial sense.




It is a liability because every month it takes money from your pocket.


It depends on what you are doing with it. I'm not an accountant, but when I look at maintenance costs such as mortgage, insurance property taxes (all fixed expenses that end up in accounts payable somehow), and utilities, maintenance on the equipment, repairs from storms that insurance isn't covering (all variable expenses that end up in accounts payable), and the capital costs that I think are going to increase the resale value........all of which is compared to the money I am going to make from owning a home.....which could be positive, negative, or zero......a home to me is more of a risky investment when it comes to the books. BUT....from the non-accounting side....if my grass is too long, I can cut it. If I don't like the paint colors, I can change it. I can live in a way that I am happy with by owning my home, and when compared to rent + additional travel expenses (from location), it is still cheaper despite utilities, insurance, etc. and when I sell, I get some of my money back.

I look at it as a glorified risky investment strategy that could be used in a round about way to either save money, or have somewhere to live when I retire provided I strategized that far ahead. That said, on my personal balance sheet, I put it as an asset because there is a high probability I will see it for more than my initial investment, and capital costs put into it. My next house won't have that luxury but it will still be cheaper than rent and it is a much nicer house that will provide many non-financial benefits.

Now...if you buy a house and rent it out for more than the liabilities it causes, then it could be an asset. You just have to be careful not to misinterpret it on the balance sheet. You may want to watch the "current" ratio on it to make sure it isn't slipping in it's return on investment (ie. tenants costing more than usual, bad winters on average, etc).


A house is a liability if you're living in it, but if you're renting it out it's an asset. If it makes you money, it's an asset.

Ian Browning

A house/home is one or the other; either an asset or a liability. If it makes you $ it's an asset, if it costs you $ it's a liability - pure and simple!What Kent Perkins, CPA said is only telling half the story; he's talking about Person A and Person B, but what he fails to realise and/or mention is that while Person A is renting, he is also spending the rest of his money on a rental which is getting paid off by the tenant. If you want to become wealthy, DON'T listen to your CPA unless they are wealthy and in my experience (no offence intended to Kent) most CPAs are not multi-millionaires. If you want to be rich then learn from the rich, no one else.


From the layman's view a house can be considered as an asset.

But in Accounting it should meet the defination of an assets first before it is classified as an asset.

According to the conceptual frame work an asset is an economic resource controlled by an entity as a result of past events, whose use will result in an inflow of resources embodying economic benefits, the cost of which can be measured reliably.


Just because you bought something and took x amount of years to pay for it doesnt make it an asset. Even if it's paid off, it still costs you money. This is why 1% owns all the wealth. Because they understand this. It's either money in or money out. If you classify something that is taking money out of your pocket as an asset then you're never getting ahead. That's not how a business runs.. People need to look at their lives as a business instead of looking at their lives as just being an employee. Besides, who gives a shit what your house costs. No one said you had to live in a house. You can live in a trailer, your car, or a tent, or on the street.

Genius' Evil Twin

When a person's net worth is calculated, is their home considered in that figure? If so, that would be an asset.

No one would foreclose on, and repossess a liability.


It is still a liability even if you pay it off. You will have an asset because you can sale it and make money, however it is still a liability because you must pay upkeep and taxes on it. Don't pay taxes, keep it up, pay utilities and you will get a lien on your asset and it becomes a bigger liability.


A home is a liability if your mortgage is underwater. A home is an asset if you have equity in it. If you have a lot of equity, or if you own it outright, you have a larger asset. Whether you live in the home or receive money from renters is not relevant. Certainly if someone else is paying you to live in your home, that can potentially add to your total assets. Paying money for maintenance can reduce your assets, but it doesn't reduce the value of the home -- in fact, potentially it increases the value of it. The key question is the value of the home compared to the amount you owe on it.


It is a liability. It COSTS you money to own a home. It TAKES money OUT of your pocket. Mortgage, interest, upkeep, taxes, insurance...all TAKE money from you. Even if you pay it off in 30 years. You still pay taxes, insurance, maintenance costs, never truly becomes an asset until you sell it...and make money OVER AND ABOVE all you have EVER SPENT on it. If you pay 30 years interest, and 30 years taxes, and 30 years mortgage, and 30 years of repairs/ have to at least make $1 above all that to consider it an asset. Something that PUTS money IN your pocket.


Your home is an liability because it takes money from your pocket... An asset is something that puts money into your pocket... Anf an liability is something taking money from your pocket...we know that schools teach you my opinion they are Accounting we are given information which in real life are i always ask people this question when you selling your home do you count all electricity, water and other utilities you been paying for... We don't count that when we are selling our home


This whole conversation is full of answers from people who don't know what they are talking about. You can "view" something as an asset or liability but that doesn't change how it is treated according to GAAP. A home is an asset. If you owe money on it, it is offset by a liability mortgage. As you continue to make payments, the liability decreases and the equity increases.
This is true regardless of where you reside physically, if you rent it out, if you hope to be rich some day, if the 1% does this or not. A home is an asset but is offset by a huge mortgage liability.
Now, as the market shifts, yes, things get tricky regarding liquidity and potentially solvency ratios, etc. But the accounting basics do not change.


If you own it outright, it’s an asset. If you rent, you are still paying taxes, maintenance, and insurance for your landlord. Even if the market drops, and you own a home outright, there’s value if you sell. I own my home outright, and I pay way less for insurance, taxes, and upkeep versus people I know that rent in my region. It’s not even close.


I have to say that only if you do not pay your mortgage then it's a liability, but if you pay it as you agreed and wether you live in it or not, it's an asset because you'll own it in the end. My fiance lives in the states he has inherited his mother's deceased estate but it has a mortgage on it, more than half is already paid for, but he is unsure on wether or not to take on a mortgage as it will be shared with his brother who is inadiquate when it comes to finance, but if they move out the house of his mother it will be lost to the bank and if they will be renting it will cost the same amount give or take monthly each, so personally l would be staying in the home kicking my brother in his rear end and get an accountant or fanatical councilor to help with the issues so it is handled correctly. My fiance is worried also about his credit rating as he feels that a mortgage may effect it but l think if they keep up the payments it could actually benefit his rating as the house although there is a mortage is an asset.Would l be right in thinking this?


Having to forever pay extremely high property taxes, even though my home is paid for, I consider it an liability. 3000 x years of life hopefully remaining is robbery. Property taxes plus upkeep makes it a total liability.


A house is never an assett You never truly own it. Miss a few mortgage payments. Who takes it from you? Even after its paid off, miss a tax payment. What happens? County auctions it off.


A house is an asset whether it is taking cash from you or not it will still belong to you at the end of the day which may eventually generate future economic benefit.


A home is an asset, just like a corporation would list their headquarter's real estate as an asset on their balance sheet.

If you have a mortgage, that debt is a liability.

It takes cash to operate the asset, such as taxes, maintenance and upkeep, which are an accounts payable under liabilities.

Sky investor

A house in accounting is an asset, a mortgage is a liability, the house appreciate over long time, the balance of your house it's what you can really obtain from it after you pay the mortgage debt, also owning a house you save money from renting. If you rent you have expenses, if you have a mortgage you are saving money


The house itself is not the liability; the loan is. The house is an asset, even if you live in it. It still has value and could easily be used for profit (e.g. renting out rooms or selling it).


As long as it has future benefits it falls under assets

Viola Solo

House is an asset. if you have a mortgage then the mortgage is a liability. The house is still an asset

Giacometti Aprile

If your house can be sold for more than you owe on the mortgage ,it s an asset. Upon your death your inheritors will receive the net cash value after expenses once the house is sold.

All those years you would have paid rent means you were in effect paying rent to yourself. It all depends how much you consider upkeep a burden. It’s certainly not a get rich quick opportunity but if you are blessed to live through retirement it becomes a terrific decision as when you can no longer afford the taxes, upkeep etc you can sell and perhaps use the net profit to pay your rent.

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