Know Your Worth!
It is important that you know your net worth so that you can make the best financial decisions for your future. You want to understand how to calculate it properly and how to use it to get the most out of your finances. For example, your net worth place a role in getting a mortgage and a monthly payment that is affordable for you.
What is Net Worth?
Your net worth looks at your assets and assesses their cash value. Once the cash value is determined, your overall net worth is determined after you subtract all debts from this number. This means that when you have cash, investments and property, and a low level of debt, you will have a higher net worth. You can increase your net worth by increasing your cash savings, securing investments and purchasing property, while also ensuring that your debt stays low. Paying off debts is also important because every debt that you pay off will increase the ratio between assets and liabilities.
Using a Net Worth Calculator
Due to technology, using a net worth calculator is all you need to get a rough estimate of your net worth. However, if you want a more precise number, you can do the math by hand. When you explore your tangible net worth, you will take your liabilities and subtract them from your assets. The higher the difference, the greater your net worth. Ideally, you want your assets to significantly outnumber the liabilities that you have and you want to increase this divide every one to two years, on average.
How a Mortgage Repayment is Calculated
There are different mortgage calculators available that can provide you with a rough estimate as to how much you will pay each month. There is a formula that you can use to get a more accurate number, but the exact formula used can differ from lending to lender. In general, the following is considered when a lender is determining your repayment amount: the monthly interest rate, the amount borrowed and the term of the loan.
When you are determining your mortgage repayment, there are five main mortgage types that you can consider. These may impact your repayment plan, especially on an interest basis because some types of mortgages do not have a set interest rate. Balloon and fixed rate mortgages have a fixed rate, but with a balloon mortgage, this is not guaranteed throughout the entire term of the loan. An adjustable rate mortgage has interest rates that can fluctuate. With a VA or an FHA mortgage loan, you will get low interest rates, but they may be fixed or variable.
Knowing your net worth gives you an opportunity to apply for credit opportunities that you have the best chance at qualifying for. This will also help you in determining a mortgage repayment amount that you can easily afford. It is important that you calculate this correctly to ensure that you get an accurate picture of your financial profile.