Whether you are a first time home buyer, a seasoned home owner, or a veteran real estate investor, here are some pointers on protecting yourself from the down cycles:
Lock in the interest rate on your mortgage. One out of 3 homebuyers took out adjustable rate or interest-only mortgages. Try your best to avoid this by getting a 30-year or 15-year fixed-rate mortgage.
If you have an adjustable mortgage, refinance while rates are still low. Try to lock your rate in for at least five years to protect yourself in case you run into a down cycle during which selling may not make sense.
Pay a little extra on your mortgage every month. Any over payment should be applied directly to your principal. Double check with your lender. And if you have a interest-only mortgage, either refinance or begin paying on your principal.
Use the equity in your home or investment property wisely. David reccomends that you use equity to build your assets not "borrow them". Specifically , borrow your equity out of your house to buy more real estate, improve your current home, or buy more assets. DO NOT use your equity to pay off credit cards, take a vacation, buy a car, or for day-to-day expenses.
Start building an emergency savings account; aim to have six months' worth of housing costs in the bank. Anything less and your flirting with disaster and any signifigant amount more should be invested into other assets.