While a homeowner is paying off his or her mortgage every month, his or her house is probably increasing in market value. These factors combine to increase the homeowner’s unencumbered interest in his or her home, an asset known as home equity.
For many people who have lived in their home for many years, the equity they have in their house has built up quite a bit. If they have little income, and are approached by a person promising to help them get the equity out of the home while still getting to live there, the offer can be very tempting.
But watch out. This is known as “equity stripping,” and a lot of the time, it’s a scam, as houselogic.com reports.
In an equity stripping scheme, a homeowner sells his or her house to an investor, and continues to live in the home as a tenet. For people facing foreclosure, this can seem like a lifesaver, but often, homeowners who agree to equity stripping do not understand that they are giving up ownership of their homes, and the investors are often all too eager to mislead their “clients.” Then they charge rent that is higher than the old mortgage payments. If the homeowners fall behind, the new owner evicts them.
The equity stripper then pays off the mortgage and “inherits” the house, leaving the original homeowner homeless with no way of getting their house back.
In another version of this scam, the “mortgage refinancer” offers a loan the homeowner cannot afford, or encourages him or her to lie on a loan application to qualify for a more expensive mortgage. Then they turn around and foreclose when the homeowner cannot pay.
Either way, the end result is something no homeowner wants. But there are legal options for fighting to keep your house from scammers. Please speak to a real estate attorney as soon as possible for more information.