Thursday, March 6, 2008

Your house: asset or liability

According to the newest real-estate tax statement I received yesterday, the price of my house dropped by $75K to $325K. My mortgage is still $342K.

I became part of the negative-equity group. The group that many financial industry experts are trying hard to persuade not to just walk away. I am not going to walk away because I realized I bought the house not for its investment value, but for its sentimental value. I love my house and am not planning to move in the short term.

Once someone attaches sentimental value on a house, it becomes a financial liability. It needs to be maintained and the mortgage paid. Therefore, it is not right for me to keep thinking of my house as an asset. It becomes an asset only if I manage to sell it and I have on my hands a stack of money in exchange.

Under this consideration, my net worth is a depressing -$228K and not $100K anymore. But I am happier this way because I am being more honest to myself.

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