How to Avoid Bad Equity Loans

The Federal Trade Commission has issued alerts to homeowners–and specifically homeowners who are elderly and poor–in recent months. The market is swarming with mortgage lenders providing equity loans and some of these lenders are taking advantage of the misfortune.

Some lenders are giving loans to homeowners who do not generate enough income each month to repay the debt. The lenders’ goal is to take possession of the home once the mortgager fails to repay the debt, thus gaining equity for himself.

Some lenders are encouraging homeowners by offering them a equity loan. And some borrowers have been taken for a ride because they failed to read the terms and conditions on such loan carefully. The Balloon Repayment stipulated that the homeowner will repay only the interest toward the mortgage and once the interest is paid then the homeowner will repay the principal on the
mortgage. Thus, the homeowner pays for the interest all to find out he never paid a dime on the mortgage itself, and once the repayments kick in for the principal, the homeowner is at risk of losing his home if he doesn’t have the cash to repay the debt.

Few lenders will offer what is known as “flipping� loans. If a homeowner is paying $150 each month on his mortgage with low interest rates, and is offered and accepts the “flipping,� then he is at risk of loss, since he accepted a loan that has higher interest rates, steeper fees and costs, and interest on all the charges applied to the loan. If you are comfortable with your current mortgage arrangement, it is wise to stay put when a lender calls offering you (what appears) to be a good deal, but is probably either a scam or high-interest loan in disguise.

Article Source: http://www.a1-optimization.com/articles

Larry Westfall is the owner of www.pennystocks101.com
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