Sunday, September 19 2010
Thursday, June 03 2010
Home equity loan and refinancing scams can cost you more than money—these scams can cost you your house.
Refinancing a mortgage to a lower interest rate can make sense for some homeowners. So too can taking out a home equity loan against the value you’ve built up, perhaps to finance a kitchen remodel or pay Junior’s college tuition. What doesn’t make sense is losing your home because you fall for home equity loan and refinancing scams such as loan flipping and equity stripping. Although scam artists can be very convincing, homeowners who know what to look out for are less likely to become victims.
Loan flipping is a scam targeted at homeowners looking to get money back when they refinance a mortgage. This is often referred to as a cash-out refi. Scammers take advantage of this desire to tap the equity in a home to pay for things the homeowner couldn’t otherwise afford.
Equity stripping can occur in several ways, but at its heart is a scam artist who gains ownership of your home, borrows against it or sells it, pockets the proceeds, and disappears. You’re often left with a hefty mortgage balance and no place to live.
Watch out for unsolicited offers to refinance from companies claiming government affiliations. In particular, don’t be fooled by the use of official-sounding acronyms like “TARP” or official-looking website addresses. Scammers use these to gain your trust. Once they do, they’ll likely try to charge you for access to government assistance. Worse, they might extract enough personal information to commit identity theft.
New disclosure rules make spotting scams easier
Many unscrupulous lenders have relied on confusing paperwork to dupe borrowers into paying excessive upfront fees on loans. Others would pull last-minute rate switches at closing. Still others would disguise prepayment penalties, which can prove costly if you ever try to refinance again or retire a loan early.
Saturday, April 17 2010
If you are shopping for home equity interest rates, there are a few things for you to consider. One of the most important decisions that you will have to make is whether to go with a fixed or variable rate. Here are a few things to think about when it comes to choosing between fixed or variable rates.
Fixed Interest Rates
One option that you will find when shopping for home equity loans is the fixed interest rate. With this type of rate, you will be able to lock in a particular payment over the life of the home equity loan. With this method, you will be locking in an interest rate based upon the prevailing rate in the market at the time that you close the loan.
Variable Interest Rates
Another type of loan that you will commonly find in the market is the variable interest rate home equity loan. With this type of loan, the interest rate will fluctuate based upon a market index such as the prime rate. When this happens, your monthly payment will fluctuate up and down with the interest rate as well.
One of the most important things for you to consider when choosing between these two types of loans is what you think interest rates will do in the future. If you believe that interest rates are as low as they are going to get for many years, you would most likely be better off to get a fixed interest rate and lock it in. This way, if the interest rates in the market increase significantly in the coming years, you will not be negatively affected. However, if you expect interest rates to go down in the near future, you might be better off signing up for a variable interest rate.
Many people wish to avoid any uncertainty in their home equity loan. In this case, you would be better off to utilize a fixed rate of interest. With a fixed interest rate, you will not have to worry about your payment changing from one month to the next. You will be able to plan exactly how much your mortgage payment will be over the long term. In some cases, those that sign up for variable interest rate loans find that their monthly payment will go up significantly when interest increases. In fact, many people have noticed that their payments have doubled in only a few years. Many people would not be able to afford doubling their current home equity loan payment. Therefore, if you do not feel like taking any risks, it would be to your advantage to go ahead and get a fixed home equity loan.
Saving Money Initially
Other people prefer to save money on the front end of a transaction. If interest rates for variable loans are currently lower, it could be enticing to go with that type of loan. This can allow you to save money on the front end and worry about changing interest rates later.