[rp1]

If someone has a mortgage on a home, their net worth is still positive (unless they're under water). If you put 20,000 down on a 100,000 home and get a 80,000 mortgage, then your net worth is still 20,000. Yes, you have 80,000 in debt, but you own an asset worth 100,000. Net worth is total assets - total liabilities.

[ModernMech]

> then your net worth is still 20,000. Yes, you have 80,000 in debt, but you own an asset worth 100,000.

No you have 20% ownership of an asset that is worth $100,000. The bank owns the other 80% of that asset. When you pay your mortgage every month you are essentially buying a portion of their stake in your house. At the end of the mortgage they will own 0% and you will own 100%.

[rp1]

That’s not true at all. If you buy the house for 100k and sell it for 200k, you walk away with 120k after paying off your mortgage. If you only owned 20%, then you would walk away with 40k. Similarly, in non-recourse states (which is most states) you are on the hook for the mortgage amount if the value of the house goes down.

[telotortium]

You meant to say "recourse" states - non-recourse means that the bank can't pursue you for any remaining amount you owe on the house after they foreclose on the house. Non-recourse is not very common, but California is a non-recourse state, for example.

[rp1]

Thanks!

[ModernMech]

Ok I see what you are saying.