To simplify this the unpaid interest on your home equity loan owed just compounds yearly.

It is probably in the contract. Once your combined interest owed plus the equity loan you took out. Represent 100 percent of the pre agreed property value.

You may have to surrender the property . As there is no more security available for the money owed accumulating any more. Or start making payments.

The home may even inflate in value in say the five years. But the lenders terms will be based on the original agreed value.

Many people out there do not have the need to be financially astute. So they are not. There may even be a clause that obstructs you from reducing the amount owed under the contract terms.

So if anyone knows of anyone looking at one of these. Tell them it is best to take a copy of the contract to a lawyer before engaging it. I also suspect the interest is higher as the loan reciepient does not feel they have to pay it. They do not care. As it is deffered in their minds if they are thinking at all.

If I knew this lady depending on several things. She could perhaps rent out a room or two or take in borders. As others mentioned there are better ways than this.

Each state perhaps should make a law that the homeowner must have the contract explained to them by a lawyer when any form of deffered interest is involved. The compounding effect is murder. There are also a few other clauses I can think of in those contracts. That I would expect to be in them.