Home Equity Loans

Do you own your home? If so, it's likely to be your greatest single asset. Unfortunately, if you agree to a loan that's based on the equity you have in your home, you may be putting your most valuable asset at risk.

Homeowners-particularly elderly, minority and those with low incomes or poor credit-should be careful when borrowing money based on their home equity. Why? Certain abusive or exploitative lenders target these borrowers, who unwittingly may be putting their home on the line.

Abusive lending practices range from equity stripping and loan flipping to hiding loan terms and packing a loan with extra charges. The Federal Trade Commission urges you to be aware of these loan practices to avoid losing your home.

We urge you to consider all the facts here. What if the value of your home plummets? It looks like in 2007 real estate prices will correct, if not take a dive.

Real estate is not what it used to be. Getting a HOMEEQUITYLOAN might be very risky.

• Agree to a home equity loan if you don't have enough income to make the monthly payments.
• Sign any document you haven't read or any document that has blank spaces to be filled in after you sign.
• Let anyone pressure you into signing any document.
• Agree to a home equity loan that includes credit insurance or extra products you don't want.
• Let the promise of extra cash or lower monthly payments get in the way of your good judgment about whether the cost you will pay for the loan is really worth it.
• Deed your property to anyone. First consult an attorney, a knowledgeable family member, or someone else you trust.

Do:

• Ask specifically if credit insurance is required as a condition of the home equity loan. If it isn't, and a charge is included in your home equity loan and you don't want the insurance, ask that the charge be removed from the loan documents. If you want the added security of credit insurance, shop around for the best rates.
• Keep careful records of what you've paid, including billing statements and canceled checks. Challenge any charge you think is inaccurate.
• Check contractors' references when it is time to have work done in your home. Get more than one estimate.
• Read all items carefully. If you need an explanation of any terms or conditions, talk to someone you can trust, such as a knowledgeable family member or an attorney. Consider all the costs of financing before you agree to a home equity loan.