You've spent years paying down the mortgage on your home and building up its equity. Now, you find yourself in a situation where you need to take advantage of what you've built. There are many reputable lenders who'll give you a home equity loan to make use of that available cash stream. However, there are also a number of scam artists who may try to relieve you of your hard earned money by stripping all of the equity from your home.
What is a home equity scam?
“Equity stripping”, also called “equity skimming”, or “the foreclosure rescue scam”, is a scam where low-income earners face foreclosure. The scam first appeared around late 1999 - when some equity scammers took the properties of low-income earners, such as their homes. Here's how it works: The lender convinces you to take out a loan with monthly payments that are too high for your income. The loan is approved, because the lender reports your income as higher than it actually is. After a few months, you fall behind in your home equity loan payments. The lender
Preying on needy homeowners
Once you decide that tapping into the equity in your home would make it easier for you to meet your financial obligations, you find a lender and start the application process. In an equity stripping scam, the lender doesn't have your best interests at heart. forecloses, and you lose your home.
Scams and foreclosure
Another variation on the equity stripping scam is the lender who promises to keep you in your home despite the fact that you're facing foreclosure. What you don't know is that this lender is promising you money that will never materialize. He leads you to believe that he'll answer you financial prayers, and gets you to sign documents that you don't understand. The upshot of this is that you'll owe more per month than before the foreclosure. The lender then forecloses and you receive little or nothing for your home equity.
Whenever you're considering using your home's equity, research home equity loan rates and lenders to be sure you're getting the best deal on home equity loans. Never sign a loan agreement without making sure that you understand all of the terms, or you may be stripped of your dignity along with your equity.