At some point in your life you should probably find out your net worth. You’ll be surprised at the total, I’m sure, but you also will be surprised at how much your net worth affects other things – such as your mortgage rate. No, your net worth is not just how much money you have saved and/or how much you’re making. It’s actually quite a complex formula that takes a lot of elements into account, but knowing the ins-and-outs of your net worth and how it’s calculated you can become more educated and find out the best financial moves for someone in your situation.
A basic formula you can follow to find out your net worth is by taking your total assets and subtracting that by your total liabilities. Your assets consist of everything you own and their worth while your liabilities are how much money you owe and to who. Getting a sense of your liabilities is pretty easy because you’re billed for this; you can look up the amounts. However, your assets can be a little harder to calculate because you have to take into consideration condition and overall value. It’s very important to be honest when calculating this; for instance, don’t give your car a higher value than it really probably has. There is a difference between how much your paid for it, what it’s worth now, and how much you wish it is worth.
Once you have calculate your net worth, you’ll be on a roll! Luckily for you there is something else you can do that is very important to figure out and this is concerning your mortgage and what you can qualify for. By knowing your net worth you don’t have to hire somebody else and/or trust someone else in figuring it out. I’ve found that there is quite often some discrepancy between what someone thinks they are qualified for and what that person is actually qualified for. Nevertheless, when you’re shopping for a mortgage it’s crucial that you do lots of research. Jumping into a situation like this and taking the first option that pops is not the smartest thing to do as you might later find that there are better options out there for you. This is why I highly encourage you to look up how much mortgage you are actually qualified for.