Home Equity Loan Scams - Watch Out For These Red Flags!
If you own your home, chances are that it is your most valuable asset. As with anything valuable, you must be conscious of protecting your home and its equity. Simply put, equity is the difference between the current value of your home and what you owe on it. For example, if you have a home that’s worth $200,000 and a mortgage for $150,000, it means you have $50,000 equity. Equity Grabbing - One of the most common scams is “equity grabbing”. In one example, a homeowner may be talked into cashing out most or all of the equity in their home in exchange for a large check at settlement.
The borrower may be dazzled at the prospect of receiving all that cash at once, but not able to afford the monthly payments that follow that large check, which could cause the borrower to lose their home. Contractor Scams, - Another equity grabbing scam can be initiated by a housing contractor. The contractor may contact you offering to do home improvement work for what seems like a great price. You may say that it sounds good, but you can’t afford it, at which time, the contractor will refer you to “a lender he knows” for a home improvement loan. This loan may have initially affordable payments that can adjust after a few months of a “teaser” rate into something you can’t afford.
Make sure you read all of the fine print and don’t sign anything that’s going to be filled in later. 3-Day Right of Recision - All borrowers have a “Right of Recision” where you can cancel a refinance loan on your primary residence for up to three days after your loan closes (only Sundays are excluded). You can exercise that right for any reason, so don’t be afraid to do so if you suspect something is not right.
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