You keep seeing headlines on the web about equity in homes and how it’s the reason most real estate experts feel we are safe from a housing market collapse. This topic keeps coming up and people are probably as tired of hearing about it as other topics constantly talked about. The truth is that equity may be the key in protecting our economy from a major recession.

Building equity is one of the smartest things homeowners can do. Paying off your mortgage allows you to minimize costs and maximize profits if you were to sell your home. Equity in real estate comes down to how much you owe on your mortgage. If your mortgage is paid off, it could save you hundreds or thousands of dollars a year.

Why Is Equity So High?

With housing prices skyrocketing the last five years, many feel that a drop is expected and due. The market has shown some signs of slowing down but prices are remaining strong thus far. Experts believe that prices or values will remain strong because mortgages on the majority of homes only represent 50% of the home value or less. That means home owners own more of their properties than the banks.

Even properties owned fewer than five years have shown high equity rates. This means the restrictions which require higher down payments as well as better income percentages are helping. People are not in over their heads with their mortgages which is offering better protection against foreclosures.

Why Is That Good?

These restrictions have made buying new homes more challenging. However, it’s also protected people from getting in over their heads with their mortgage, meaning that even if home prices drop a bit, people should still be able to keep their homes.

Lowering the amount of foreclosures is key on preventing a major market collapse as we saw years ago. Ideally, having an affordable mortgage will also allow for homeowners to have additional advantages during a recession. This includes options like renting out rooms for extra income, stocking up on goods so that you can buy in bulk and save and much more.

How Can You Build More Equity

If you are interested in building up the equity in your home then you need to first look at how much you owe. Are you able to add an extra thousand dollars a year? If that seems like a lot, imagine just adding $100 to each monthly payment. However, make sure you mark it towards the principle otherwise it will go towards the interest. This simple trick can cut your mortgage down by a third ad far as cost and years you have to pay it off.

Paying off your mortgage is a great accomplishment and one that few people can do. While you may still have a mortgage, the good news is that you can pay it off sooner while also building the equity in your home. It’s important to consider your personal finance before making any decisions. You should always pay off credit card debt first as their interest rates are usually the highest. Having savings is also important and many consider six months of mortgage payments as a key measuring stick for how much they need to save up.