How much % of total savings should be in the house?

Is it ok to have loan on house & do investment with higher interest rate at other places or should one completely pay off the house loan & then plan for retirement savings. How much % of your total savings be in house if you want to have diversified investment?

Using your money to earn higher returns than the interest you pay on your house is a good financial strategy. First of all, you must understand that the mortgage interest you pay is tax deductible so its cost is less than the stated rate. For example, if your mortgage is at 6 percent and your tax bracket is 25 percent, the effective cost of your mortgage is only 4.5%. So if you can invest at more than 6 percent, you benefit more than paying off your 6 percent mortgage.

How much equity you should have in your house varies. Your equity is constantly growing. Initially it will be about 20 percent of the home value, that being about the down payment. Your home should not be looked at as an investment because its purpose is to provide shelter. Nevertheless, it is part of your net worth so you can view it as part of your investment portoflio, but a part that you cannot liquidate.

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