When you bought a $75,000 house with a mortgage at a fixed rate of 9% over 30 years, the mortgage interest will cost you $217,244, and in this case, the house actually is not your asset but liability. The bank has the greatest equity in this house, so obviously it is bank’s asset.
Most people don’t understand why the house they are living is not the asset. Asset is something that puts money in your pocket, liability is something that takes money out of your pocket. A good strategy owning an equity house is to reduce the portion of your mortgage payment that goes to interest and increase the portion that is applied to the principal. What you can do is to make bi-weekly payments instead of monthly payments, if you get a bonus or an inheritance, use it to reduce your principal.
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Lillian & Benjamin, we help families achieve financial success
contact: lillianwenli@yahoo.ca
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