How loan flipping works
乐竞体育全站 typical situation involves a lender that coaxes and convinces a homeowner to repeatedly refinance their mortgage while also persuading them to borrow more money each time. Eventually, the borrower ends up with higher loan payments that they cannot afford while also reducing the hard-earned equity in their home, while that lender charges fees and points with each transaction.
Usually the homeowners of this predatory practice tend to be seniors and unsophisticated borrowers. 乐竞体育全站se lenders persuade homeowners to take advantage of a cash-out refinance when they may not need to, or that there is a better loan product available than the one they presently have. While on its face the loan may appear to be a good deal, the additional fees and costs of the loan can put the borrower into a loan product that is not in their best interest.
Spotting a loan flipping scam
- You will be approached without you requesting help or having the need to obtain a new loan.
- 乐竞体育全站 lending company will try to lock you into a new long-term high cost loan, even though doing so doesn't benefit you as the homeowner.
- You will be repeatedly asked to refinance your home, oftentimes at a higher loan amount and interest rate.
- You will be asked to take out a loan to 鈥渃ash out鈥� your home equity when there is no need.
How you can protect yourself
When it comes to a mortgage, always get advice from a trusted professional and speak to several lenders. If you recently refinanced your home, it may not be in your best interest to quickly turn around and refinance again. Make sure that you deal with legitimate lenders and familiar banks, and also that you can personally meet with those loan officers. You should receive loan disclosures and a satisfactory explanation of all the loan fees and charges. Finally, before closing on a loan read all of the documents and make sure you understand the new terms and fees.