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As you begin to pay off your mortgage, you’ll also gain the benefits of some strong assets, which can be put to work to really pave the way for a strong financial future. This is one of the great benefits of home ownership — as long as you maintain a strong payment history and you make well-informed decisions, you can be leveraging your assets to work for you.

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Understanding Assets

Before you can begin to leverage your mortgage, you’ll want to understand what an asset truly is. Simply put, an asset is anything that you own that you can benefit from or that can generate income. Cash can be an asset just as much as your home or business. If you own your home, chances are you’ve built up enough equity that your home is now an asset instead of a liability. If your home is worth more than you owe, then you’ve built up equity, so your mortgage, even though you still owe a lot of money, is actually an asset.

Use Your Assets

Now that you have your home as an asset, you can look at it in a few different ways, since it’s your asset. You can sell your home for a profit, either quickly for a fast turnaround or even long-term, after having owned it for a while. Or, you can use your home as a rental property, which then generates income, giving you another way to use your assets. If you’re in need of quick money and you’ve built up enough equity in your home by making regular mortgage payments, then you can borrow against that equity, giving you a third way to use your home as an asset.

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Leveraging Your Assets

Most financial plans tell you to pay off your mortgage as soon as possible so you can get out of debt quickly. However, you may find out that taking a longer loan with a good interest rate can help you leverage that asset for a much higher rate of return. For example, you could purchase a rental property for $100,000, and you could make a profit of $10,000 on it every year, which is great. Or, if you could use that same $100,000 as a down payment on a five similar rental properties, putting $20,000 down on each. Now you have five rental properties paying you $10,000 profit every year instead of just one. Of course, these numbers are just hypothetical, and you’ll want to consider interest rates and many other details before you begin investing your money.

Consider Risk

You’ll also want to keep in mind that every investment is a risk. The market can change and your homes may decrease in value. Or, you may find out that you’ve leveraged too much and you can’t handle the responsibilities, upkeep or taxes involved in your investment. Whether you’re investing in real estate or looking at ways to use your own mortgage to improve your financial situation, just be sure to read the fine print, understand your interest rates and know all the details before you sign on the bottom line.

Deborah Flomberg is a theater professional, freelance writer and Denver native. Her work can be found at Examiner.com.

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