Home Equity Loans - The 3 Deadly Sins of Bad Lenders

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Home Equity Loans - The 3 Deadly Sins of Bad Lenders Powered By Docstoc
					by: Ron Treveli

Youve heard of The 7 Deadly Sins, well heres a bit of a spin, but the consequences can be severe
if you dont take these into consideration, or keep your eyes open for lenders who could possibly
be doing this.

Now, there are other more varied approaches that lenders can take, but Id like to make you aware
of the 3 more common ones.

1. When NOT To Sign Over Your Deed

Ok, heres the situation, youre having trouble paying your monthly payments with your current
lender. Theyve stepped up the game and have gone as far as to threaten foreclosure on your

Worried, and not sure what to do, another lender approaches you, and offers to help you out by
refinancing and helping you out in your predicament. But, because he can help you, he says as
part of the formality, he needs you to assign your deed over to him, saying something like it will
mean that your current lender will not be able to foreclose.

DO NOT DO THIS! Once the lender has your deed, the financing will likely not come through,
and youll be left in a home you no longer own. The lender can then almost do whatever he
wants, and will treat you as a tenant, not as an owner.

2. When NOT To Draw Down On Your Equity

Youre in need of some money maybe youve hit some medical bills that werent expected. Youve
successfully built up a considerable amount of equity in your home over the years, and think that
youd like to use that.

A lender approaches you, and says they can do it, but even though you wont be able to a fford the
higher monthly payments, they tell you to just bump up your income a little to make it get
through, then worry about it after.

The problem with this is that youll likely lose your home. Im not kidding, lenders like this dont
care if you cant make the monthly payments, if you default, then theyll just take your home and
sell it and pocket the difference. Stay CLEAR of these people.

3. The Hidden Balloon Payment Clause

If youre pressed for payments, and want to refinance, make sure you read the fine print of the
contract. A lender might come to you and say that they can reduce your monthly payments and
save you from foreclosure. That might be well and good, but in the fine print, you might find
something that says that the balance of the principal amount is due at the END of the loan in one
lump some payment.
If this is the case, be VERY careful, and dont do this, youll likely face foreclosure anyway at the
end of that loan.

I hope that this guide has been helpful for you, and opened your eyes to some possibilities that
are out there.

This article was posted on September 27, 2005