One danger to watch out for when you
refinance
is predatory lending. Lenders who engage in this practice charge
exceptionally high fees, and higher than market
interest rates,
which strip borrowers of the
equity
in their homes. Predatory
lenders target certain demographic groups — often the elderly,
who may have more equity, and low-income homebuyers, who may have
difficulty getting approved for other loans.
The loans predatory lenders offer may include:
Prepayment penalties
so you’re charged a hefty fee for paying the
loan off early
A hidden
balloon
payment
policy, meaning you’ll have to pay off the entire
loan in one payment after only a few years
Steep interest rates
even if you have good credit
Unnecessary
insurance policies, such as credit, disability, or
unemployment insurance, which carry high premiums
