One way the lender can add extra costs to your loan is by adding “credit insurance”. Often these are charges for benefits and insurance you didn’t ask for. The lender may insist that these come with the loan or that the loan would have to be re-written if you refuse them and may not be approved. Usually, the lender hopes you do not notice these extra charges. If you agree to pay for the insurance, you may be paying a lot more for your loan than you bargained for.

Don’t agree to a loan that includes credit insurance or extra products you don’t want. If credit insurance is a condition of the loan, shop around for the best rates.

A lender has offered you a refinancing loan that will significantly reduce your monthly mortgage payments. Read the loan terms carefully.

Your payments may be lower because it is a loan on which you repay only the interest each month. At the end of the loan term, the principal is due in one lump sum, called a balloon payment. You must then pay the entire sum or refinance; if you cannot, you may lose your home.

You may already have a mortgage and have no difficulty making the payments but the lure of some extra cash makes the thought of refinancing an appealing one. A lender tells you how you can get the equity in your home working for you through refinancing and borrow a little extra for your immediate needs or desires.

After you have made a few payments, the lender offers you a bigger loan for some other expenditure, such as home improvement or a vacation. If you agree, your loan is again refinanced into a new loan and the lender loans you more money. This is called loan-flipping. Every time the lender refinances the loan, the lender charges points and fees and your interest rate may increase.

Your debt increases and is stretched out over a longer period of time. The extra cash you receive could be more than offset by the fees you are charged for refinancing. You will also be paying interest on those extra fees. In the end you could end up owing more than you can afford and lose your home.

If you own your own home it may be your single greatest asset. Opportunites abound for homeowners who are house-rich but cash-poor to turn the equity in their home into cash but beware - not all home equity loans are equal and some lenders may exploit low-income borrowers.

If a lender is aware that your monthly income is not enough to qualify for the loan and advises you to exaggerate your income on the application, the lender may be looking only to a future foreclosure. This type of lender doesn’t care if you don’t meet your obligations, he is looking to take your home in foreclosure when you default on the loan.

Some abusive lenders target the elderly, and those with low-income or poor credit. Don’t sign a home equity loan if you do not have sufficient income to keep up the payments. Lenders who “help” you get the loan approved are setting you up and you will lose your home. Don’t risk your most valuable asset.