When you think of celebrities and wealth, you would never consider the fact of them having mortgages. Wealth can be amassed through their careers and possessions, but that is not a guaranteed way of increasing wealth. There is a sure-fire way for them to build wealth that is lasting. That way is through the use of mortgages.
Before understanding how this concept can work, the definition of wealth must be known. According to Merriam-Webster, wealth is an abundance of valuable material possessions and resources. This not only applies to people, but to countries and governments as well. The bottom line is simply this; the more items that you own that are worth money, the wealthier you are.
Mortgages on various properties can help build substantial wealth. Even though it will cause you to go into debt at first, it is a good debt. This means that it is debt that can be controlled and paid off without causing financial ruin. Not only will the value of the properties be added onto the net wealth of a person, but the mortgage itself is considered to be a forced savings account.
A forced savings account is exactly what it seems to be. Money must be paid towards the mortgage each and every month to prevent the loss of the property. Every payment made will increase the home equity, which in turn increases the amount of wealth that the person has. You are forced to save money to ensure that the monthly payment can be made.
This may seem complicated at first, but once the numbers are laid out, everything becomes clear. To make it a little easier to understand, once a mortgage is signed, the property is possessed by the lending agency. As each payment is made, the money spent lowers the amount owed on the property, which raises the equity. As equity goes up, wealth goes up.
New home loans are not the only way to use mortgages to increase wealth. Refinancing a mortgage to obtain a lower interest rate is a way to increase the equity of the home. As explained before, as each payment is made, equity goes up. If you get a mortgage that lowers the amount of interest owed, the equity will increase the amount that you have saved on interest.
Rentals are a huge way to gain wealth. Buying numerous properties through mortgages and then renting them out allows money that is already amassed to stay with the owner, while the renters pay off the mortgages. The more properties you own, more wealthier you become. Being a landlord can come with its own set of headaches if you do not hire a rental agency to deal with everything, but the end result is worth the hassle.
Another fantastic way to gain wealth is to flip property. Instead of renting houses to other people, it is possible to sell them at a profit. It is usually a straightforward process to find a house below market value because it needs some work. A mortgage to buy this type of house, as well as to renovate it, is a debt that can be paid off quickly. As soon as the repairs are made, it can be listed on the market at the current value, which will be above the original cost and the remodeling combined.
Everyone has heard the saying that “you have to spend money to make money.” This is true in your world as well as the world of the celebrity. You must realize that the bigger the property is, the higher the bills are going to be. True wealth cannot be created by simply working and trying to save money. Most people are not able to save money on their own. When you have money, you spend money. The more money that you have, the more cash you will spend.