Refinancing A Home Mortgage Loan
Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms. Remember that, along with the potential benefits to refinancing, there are also costs.
If you are a homeowner who needs money to pay bills or for home repairs, you may think a home equity loan is the answer. You could lose your home and your money. Before you sign on the line, think about your options, do your homework, think twice before you sign, know that you have rights under the law, and comparison shop for a home equity loan.
When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Refinancing may remind you of what you went through in obtaining your original mortgage, since you may encounter many of the same procedures and the same types of costs the second time around.
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If you are having money problems, consider these options before you put your home on the line:
Talk with your creditors or with representatives of non-profit or other reputable credit or budget counseling organizations to work out a plan that reduces your bill payments to a more manageable level.
Contact your local social service agency, community or religious groups, and local or state housing agencies. They may have programs that help consumers, including the elderly and those with disabilities, with energy bills, home repairs, or other emergency needs.
Contact a local housing counseling agency to discuss your needs. Call the U.S. Department of Housing and Urban Development toll-free at 800-569-
Talk with someone other than the lender or broker offering the loan who is knowledgeable and you trust before making any decisions. Remember, if you decide to get a home equity loan and can't make the payments, the lender could foreclose and you would lose your home.
If you decide refinancing your mortgage loan is right for you, talk with several lenders, including at least one bank, savings and loan, or credit union in your community. Their loans may cost less than loans from finance companies. And don't assume that if you are on a fixed income or have credit problems, you won't qualify for a loan from a bank, savings and loan, or credit union--they may have the loan you want!
Consumer Beware: Not all loans and lenders are the same and you should shop around. The cost of doing business with high-cost lenders can be excessive and, sometimes, downright abusive. For example, certain lenders that are often called "predatory lenders" target homeowners who have low incomes or credit problems or who are elderly by deceiving them about loan terms or giving them loans they cannot afford to repay.
Borrowing from an unscrupulous lender, especially one who offers you a high-cost loan using your home as security, is risky business.
Did You Know? If you're using your home as security for a home equity loan (or for a second mortgage loan or a line of credit), federal law gives you 3 business days after signing the loan papers to cancel the deal--for any reason--without penalty. You must cancel in writing. The lender must return any money you have paid to date.