Or, more specifically :Should the equity in your personal residence count toward your net worth ?
It absolutely does (reasons below), minus expenses required to sell. However people should also consider their net worth minus personal residence when assessing their financial situation.
Reason #1 : If you do not count homne equity you can have the following situattion. Person A has a 50% LTV loan remaining on their million-dollar home. 500K in equity. They decide to take out a home equity loan for 500K so that they have 100% LTV. ALl of the sudden their net worth goes up by 500K in that situation. Does that make sense ? NO.
Reason #2: Powayseller decises to sell her house in which she has 250K in equity. When she sells her net worth goes up 250K if you previously excluded home equity. However, those funds are presumably for purchase of a house some time in the future. Either way the 250K of worth was under her control. It shoudl count.
