Scams to watch out for when refinancing your mortgage – Home ownership is one of the greatest feelings in the world, but it can also be one of the most challenging. Homeownership requires regular maintenance and upkeep while simultaneously investing in long-term financial stability. If your credit isn’t good enough to qualify for a bank loan to purchase a house, you’re out of luck. That being said, there are still plenty of legitimate ways to buy a home that meet your property standards and financial requirements. Scams related to refinancing mortgages may look like an obvious place to start, but they’re actually fairly widespread. The concept is simple: Give an imposter your mortgage information, and you can refinance with lower interest rates and no stress. Here are 5 common scams to avoid when refinancing your mortgage.
The “no credit check” refinancing scam
Some mortgage providers will offer to refinance a loan with a lower interest rate if you do not have a credit history. This is usually the case for very low interest rates and short-term loans. However, when refinancing a loan with a higher interest rate, you may be asked for proof of credit. This includes a credit report, a recent payment, and even a government-issued photo ID. You can avoid this scam by making sure you enter the numbers on your application exactly as they appear on your credit report. If you get general information like the “years on mortgage” and “collections on mortgage” fields, you’re not giving your lender full and accurate information.
The “no down payment” refinancing scam
This is another common refinancing scam, in which the perpetrator is asking you to make a cash donation to help with closing costs. In some cases, the scammers will promise to take the place of the missing down payment, or provide you with a free down payment. However, this is a cash-out refinance, and you’re giving the perpetrator your money. If you’re refinancing your mortgage to pay for other expenses, like a car loan, you may be tempted to enter a cash-out refinance. However, a cash-out refinance does not give you the same protections that a conventional refinance would. In particular, the federal government does not recognize cash-out refinances as legitimate mortgage transactions. As a result, your refinancing may fall under the government’s “no-fault” mortgage laws and you could be held accountable for damages caused by the foreclosure process.
The “after tax refinance scam”
This one is pretty straight forward. The perpetrator is a shell company that is trying to refinance your mortgage. They might use a fancy name like “After Tax Refinance,” “Tax Refinance,” or “Tax Credit Refinance.” When you refinance, you are responsible for paying any taxes that you did not pay during your first decade of income. It’s one of the many things that your lender will examine when deciding whether to approve your application for a mortgage. Typically, when you refinance, you will pay a reduced rate for tax-related purposes. However, this is not the case with all tax-refinance companies. Some promote themselves as the “only tax-refinance company in the business” and then provide a list of cities where they have exclusive tax-refinance privileges. However, make sure you’re aware of the risks involved with each type of refinance before you make a decision.
The “I can’t afford my mortgage” refinance scam
In this particular scam, the perpetrator is asking you to refinance with a low interest rate and pay a small fee to expedite the process. However, this is not a real refinance and you are not getting a real mortgage. This fee is only charged to cover the cost of filing the application and processing the loan. When refinancing, you are not purchasing a house. The perpetrator only wants to use your home equity as a tool to speed up the loan process. This is not a real refinance. You are not refinancing your mortgage.
The “get rich quick scheme” refinancing scam
Some people get involved in a “get rich quick” scheme when they refinance their mortgage. They promise to refinance at a certain rate and on certain terms, but then refuse to give you a mortgage or other financial product in return. This just makes no sense. First, you’re getting a pointless loan. Second, anyone can promise to refinance their mortgage, but you’re just asking for more stress and heartbreak. There are legit ways to buy a home that qualify you for a low interest rate and favorable terms. There are also ways to refinance your mortgage and get the same low interest rate and favorable terms with no additional effort. Don’t get involved in a scam just to get a quick payoff. Refinance with a legitimate mortgage lender and save yourself some time, stress, and money.
refinancing your mortgage is an important part of your financial well-being. However, it’s important to do your research and check out multiple options before making a final decision. In particular, make sure you get multiple quotes from different lenders before deciding on a final rate. When you refinance, you are essentially taking out a smaller, regular mortgage with a different lender. You are therefore subject to all of the same lending rules and regulations as if you were still making payments on the original loan. When refinancing, you are also taking out a smaller mortgage that will allow you to make smaller monthly payments. This can lead to lower monthly interest rates, but also means you’re paying off a larger amount over time. Finally, make sure that you are filing your tax return properly. The government will examine your refinance and determine if you owe taxes. If you don’t pay your taxes on time, you may be subject to IRS penalties and interest. Refinance your loan and pay your taxes on time, and you’ll be fine.