Lenders engaged in "equity stripping" will often present borrowers with "too good to be true" deals, leading them to believe that they are saving money. And once the borrower agrees to the contract, the lender will apply new charges, high interest, and other fees that puts weight on the borrower, until he or she breaks and fails to make payments on the mortgage.

The lender then repossesses the home, selling the house for a profit while the borrower is standing on the corner, wondering where he will live next. Consequently the U.S. Federal Government has provided information to help borrowers avoid losing.

Since equity stripping is becoming a huge industry, the Fed’s advises homeowners to watch out for equity stripping, including paying attention to lenders that are offering loans that reach above your wages.

The Fed also advises borrowers to stay alert to "loan flipping", which is a process of switching loans regularly and requesting larger amounts of cash on each refinance applied.

If a lender is pressuring you to sign an agreement, you will need to find another lender, since pressuring borrowers is a sure-fire tip that the lender is out to take you for a ride.

You will also want to consider PMI (Personal Mortgage Insurance), which is a requirement. However, few lenders attempt to charge for additional coverage that is not needed. Thus, homeowners, especially the less fortunate, should adhere to advice and very carefully read details of any loan offered.

Now go on to the next step in your home equity loan guide which focuses on ISA equity loans.