Refinancing can be defined as a way for paying off your existing mortgage by taking out a new one. But before taking a loan, think carefully whether you can make the required payments or not, otherwise you could lose your home as well as the equity you've built up.

There are certain lenders who target older or low-income homeowners or those who have credit problems, and offer loans based on the equity in your home and not your repayment capacity. It could be very expensive to borrow money at high interest rates and credit costs, even if you use your home as collateral.

Many a times certain problems arise after closing of the previous mortgage. The old mortgage company claims that the old mortgage is not yet paid off i.e. they had not yet received the money from the new lender although you signed all the documents and got the home refinanced. This generally happens when you may have chosen a wrong lender for refinancing, but it can cost you a lot. So, at the time of refinancing you should be aware of lenders who:

• Ask you to fill in incorrect information on the loan application like if he asks you to fill an income higher than the actual one.

• Ask you to apply for a loan more than you need.

• Pressurizes you in accepting monthly payments plan which you can't afford to make.

• Does not provide the required loan disclosures.

• Misrepresents the kind of credit you're getting.

• Promises one set of terms when you apply, and gives you another set of terms to sign; without a proper explanation for the change.

• Ask you to sign blank forms and tells that they'll fill in the blanks later.

• Says you can't have copies of the documents that you've signed.

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