Here’s a deal that sounds too good to be true: Some companies are promoting home equity contracts, where they pay you money now in exchange for a share of your home’s value increase.
However, like many things that sound too good to be true, this can be a little, well, too good to be true.
What the people pushing these deals don’t go out of their way to tell you is that, even if your home loses value, you may still owe more than you received.
Also, some companies don’t follow the usual loan rules, like giving clear information about costs or checking if you can pay back the money. They may also include arbitration clauses that prevent you from going to court if there’s a problem.
These contracts can be expensive, with high closing costs and a large balloon payment at the end. You may have to sell your home or borrow money to pay off the contract. The company may also put a lien on your house, making it harder to refinance or get another loan.
If you face trouble with a home equity contract, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov/complaint, or consult with an attorney.
Truman LewisReporter
A former reporter and bureau chief for broadcast outlets and magazines, Truman Lewis has covered presidential campaigns, state politics and stories ranging from organized crime to environmental protection.
