How to Spot and Avoid Equity Scams
Homeowners not only have to worry about burglars breaking into their home, but also thieves breaking into their home equity. Home equity scammers attack through refinancing, because the process is easily manipulated. They target minority homeowners or those who have bad credit or low income. The scammers are hard to spot, often posing as legitimate lenders.
Most loaners on the equity loan market are authorised loaners; however, some loaners are taking the less promising for a ride. These unscrupulus loaners propose appealing loans, yet fail to tell the borrower about hidden charges or “inflate” charges. Hidden charges are often stripped from loans, as the APR is a supposed security to borrower that combs out hidden fees.
“Equity Stripping” is one of the leading scams on the loan market. The loaners engaging in “equitys stripping” will frequently present to borrowers (too good to be real) deals, leading them to believe that they’re saving money. Hence, once the borrower agrees to the contract, the loaner will pose new charges, high interest, and other fees that puts weight on the borrower, until he or she breaks and
fails to make payments on the mortgage. The loaner then reclaims the home, selling the house for profit while the borrower is standing on the corner, questioning where he will live next.
Thus, the Federal Government has provided information to aid borrowers avoid suffering. As equity stripping is becoming a huge industry, the Fed’s advise householders to look out for equity stripping, including paying attention to loaners that are proposing loans that reach above your wages.
The feds also advise borrowers to stay alert to “loan flipping,” which is the process of switching loans regularly and requesting larger amounts of cash on each refinance applied. If a loaner is pressuring you to sign an agreement, you’ll need to find another loaner, as pressuring
borrowers is a surefire tip that the loaner is out to take you for a ride. You’ll also prefer to consider PMI, which is personal mortgage insurance, which is a requirement; however, some loaners attempt to
charge for additional coverage that’s not required. Thus, householders, specially the less promising, should adhere to advice and read details of any loan provided soundly.