Understanding types of assets

When you apply for a mortgage, lenders will often want to see a list of your financial assets¹ to help them decide whether you’re a good fit for a loan. There are many types of assets, including cash, stocks, retirement accounts, and real estate, and each has different uses and features.

We’ll break down the different types of assets, what makes them different, and why they each matter for planning your finances.

What are assets?

An asset is any item, whether physically tangible or intangible, that has value when used in an exchange. Put another way, anything you can use, sell, or leverage to make money.

For example, a car is an asset because you could sell it to someone else for money. A song you’ve written is an asset even though it’s not a physical thing, because you can sell copies of the song for download or get royalties when someone streams and listens to it.

You can use these tests to determine if something is an asset you own.

• It has value
• You own or control it
• It can provide an immediate or future benefit
• It can be measured or quantified

6 types of assets

There are many different types of assets, each with unique features and uses. These are some of the most common.

1. Liquid assets

Liquid assets are those that are very easy to use and spend. Cash and cash equivalents are the most basic type of liquid assets, but anything you could immediately sell or trade to someone else can also be considered a liquid asset. For example, some financial assets, like stocks or bonds, may also be considered liquid assets, but not all liquid assets are a type of financial or equity asset.

2. Tangible assets

Tangible assets are physical things that you own and control. For example, a home, car, boat, art, jewelry, and other physical items of value are all tangible assets.

3. Intangible assets

Intangible assets are the opposite of tangible assets. They are not physical things but have some type of legal or other value. For example, a patent, trademark, or source of royalties are all examples of intangible assets.

In some cases, intangible assets that produce income, like royalties or licenses, can also be considered financial assets. For example, your 401(k) is an intangible asset and an equity asset.

4. Fixed assets

A fixed asset is a type of tangible asset that a person or business owns or uses for the long term. A home, antiques, or a factory would all be examples of a fixed asset.

5. Equity assets

Equity assets (also called financial assets) are assets that represent ownership or investment in something that has value. For example, a stock, which represents ownership in a company that produces financial value, is a type of equity or financial asset. Mutual funds and 401(k) balances are also equity assets.

6. Fixed-income assets

A fixed-income asset is another type of financial asset that generates a stream of revenue, such as bonds, which pay interest. Some other securities may also count as fixed-income assets if they produce a consistent stream of income.

What is an asset statement?

An asset statement is a financial document that itemizes all of the assets that a person, business, or other organization owns and the value of each of those assets.

Often, when you apply for a mortgage, your lender will ask for an asset statement that shows all of the things of value that you own. This can help the lender confirm that you can handle the mortgage and have sufficient funds to handle upfront costs like a down payment or closing costs.

You may have to provide many different documents to your lender, such as:

• Bank statements
• Investment summaries
• Retirement account statements
• Documentation for valuable property or vehicles

Your lender will review the documents you provide and may get confirmation of your assets by contacting the institutions that hold them or order appraisals of physical property.

How to calculate the value of your assets

Calculating the value of your assets can be difficult in some cases. While certain assets, such as cash in your checking account or stocks that are frequently traded on the open market, have a clear and easy-to-quantify value, other assets can be harder to value.

For example, if you have a piece of art from one hundred years ago that you bought for $3,000 twenty years ago, how can you know what it’s worth today? If you want to buy a home, it may be difficult to determine precisely what the value of it is.

You may need to hire a professional appraiser to examine any assets that are more difficult to value so you can provide accurate estimates on your asset statement when you apply for a loan. There are online calculators for some types of assets that can provide estimates, but hiring a professional will provide a more reliable valuation.

The bottom line: You might have more assets than you think

While almost everyone knows that things like cash, investments, and property are types of assets, there are many other types of assets that you might own. Getting a full understanding of your assets and how you can use them to build wealth can help you improve your financial situation.

If you’re looking for help building wealth in real estate, Rocket Mortgage® has a guide to real estate investing. And if you’re ready to take the next step toward buying a house, you can reach out to see what you may qualify for.

¹This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.