Before Signing

Avoid "Balloon" Payments
One way that lenders make loans sound very good is to make the monthly payment small but then require a big balloon payment at the end of the loan period. Some loans have you wait to repay the entire loan amount until the loan term ends. Dishonest lenders may promise to help you refinance when it comes time to pay it off, but watch out! This promise may be just a way for the lender to charge you higher fees and closing costs. Predatory lenders make money by charging excessive fees every time they refinance the loan and they'll encourage you to refinance often.

In the worst case, you can end up owing more money than the house is worth. AARP has helped several homeowners sue fraudulent lenders when the homeowners lost their homes (or were about to) because of many high priced refinancings.

Consider Reverse Mortgages
If you are 62 or older, a reverse mortgage may be better than getting a home equity loan. A reverse mortgage, which is based on the equity you have built up in the house over time, gives you money that you don't have repay until you move, sell the house, or die. You can choose to get the money as a lump sum payment, a monthly income, or a combination of both. If you get a reverse mortgage, you can't lose your house to foreclosure the way you could with a home equity loan.

Since a reverse mortgage uses the equity in your home, you need to consider your options carefully. For instance, if your home does not continue to grow in value after you take out a reverse mortgage, you may have less of an estate to leave your heirs.

Read everything carefully
Whenever you borrow money, don't sign anything you don't fully understand. Always assume that any paper you sign is a contract. You can insist on changing anything in a contract that you don't like or can't agree to. If the lender won't change the contract to your satisfaction, get a loan somewhere else. Some predatory lenders dramatically change the loan terms at the last minute from what you thought you were promised. Before you sign the loan papers, ask a lawyer or trusted friend to go over them with you. Don't sign a document with blank spaces; all spaces should be filled in before you sign.

After Signing

You can change your mind
You can back out of getting a loan any time before you sign. Stop the loan process if a new development surprises you until you get answers you need,. If you've already signed a contract that uses your home as security, the Truth in Lending Act allows you to change your mind, for any reason, within three business days of signing the contract. If you change your mind, put it in writing and mail to the lender.

www.aarp.org

815 S Freedom Blvd.
Suite 100
Provo, UT 84601

Phone: 801.373.8200
Fax: 801.373.8228
Email:

United Way logo

HUD Approved Housing Counseling Agency

Helping People. Changing lives.