Homeowners
are constantly barraged
by all types
of solicitations from
companies trying to
tap into their home
equity. Often, these
lenders use deceptive
tactics and pay little
regard for your long-term
benefit. Below are
some typical scams
to watch out for:
Income Padding
Income padding involves
a lender encouraging
you to exaggerate
your income in order
to get you approved
for a home equity
loan. The lender
or broker isn’t
concerned that you
will not actually
be able to make the
monthly payments,
because once the
loan is extended,
the creditor holds
the home as collateral,
and is able to foreclose.
Loan Flipping
Loan flipping occurs
when a lender repeatedly
encourages you to
refinance your mortgage
and borrow more money.
Mortgage brokers
make their money
by closing on as
many loans as possible
and often encourage
homeowners to refinance
even when it is detrimental.
There are often high
hidden fees involved
in the loan and a
slightly lower monthly
payment may still
mean a significantly
higher amount of
total debt and longer
loan term.
Deceptive Loan Servicing
Many times, lenders
fail to provide you
with all of the information
regarding fees and
costs associated
with a new loan.
You may be looking
for a lower monthly
payment or a better
interest rate, but
often aren’t
told the long-term
obligations that
you are undertaking
or are deceived about
hidden costs and
fees.
The Home Improvement
Loan
Watch out for contractors
offering to do work
on your house and stating
that they can arrange
all the financing for
the work done on the
property. Later, you
find out that you have
agreed to a home equity
loan that could jeopardize
your rights to own
the home. With a lien
on your home, the contractor
has little motivation
to do a good job on
the home repairs and
some even disappear.
Signing Over Your
Deed
Beware when a lender
offers to help you
bring your mortgage
payment current in
exchange for you signing
over the deed to your
home. Often, the lender
will allow the homeowner
to remain in the property
as a lure to sign over
the title. Once the
transfer is completed,
you have signed away
your ownership interest
and have simply become
a tenant in a house
that you no longer
own.
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