Using Your Home as Collateral
FL Hard Money Network | Siesta Key Home Refinance
Using your home as collateral on a loan is a common practice when obtaining home equity loans or lines of credit. The downside of this is that your home is now being used to secure the loan, and you could lose it if you are unable to make the loan payments. Review all home equity loan considerations before making the decision to secure a loan with your home.
There are warning signs you need to learn when comparing lenders for home equity loans. Be careful if you see any of these behaviors occurring during your loan process:
- The lender tells you to falsify your application, perhaps by overstating your income or other facts
- You are pressured to borrow more money than you need
- Pressure is applied to accept a higher monthly loan payment than you can afford
- Doesn’t provide loan disclosures or discourages you from reading them
- Misrepresents any part of the loan, such as calling a simple loan a line of credit
- Changes loan terms between the time of application and closing, without reasonable explanations of the change
- Suggests you sign blank forms or refuses to give you copies of forms you sign
When looking for ways to use the equity in your home it pays to shop around. Interest rates can vary widely, points and fees can add greatly to the loan cost, the loan term may not be suitable for you, the monthly payment needs to be affordable, you need to know if there are balloon payments or pre-payment penalties, the penalties for late payments or defaults, and whether or not you are required to purchase loan or disability insurance. You can and should ask for Good Faith Estimates and Truth In Lending Disclosures to use for comparing lenders.
You have the right to ask for copies of forms you may be signing, although lenders are not always required to provide them. You should also confirm at closing if any loan terms have changed and why. Also, make sure you understand if any insurance is required or offered for your loan, as these will change the amount of the loan and your obligation to repay it. Your responsibility as a borrower is to take the time to understand your loan and ask questions if you need clarification. Any attempts by the lender to squash this conversation should be a warning sign to you.
If you are prepared to use your home as collateral for a loan and cannot obtain conventional financing, the AHL Hard Money Network can help. Our investors want to put their money to work helping homeowners who can’t obtain conventional financing or need the money more quickly than will happen with conventional lenders. Contact the AHL Hard Money Network today for more information on tapping into your home’s equity.