Home Mortgage and Refinancing » 125 home equity loan

Understanding 125 Home Equity Loan

admin — Fri, 09 Oct 2009 13:56:37 +0000

A 125 home equity loan, like the name indicates, is a loan that is based on the equity in your home. However, traditional home equity loans are generally only for the actual amount of the equity that you have built up on your house. With a 125% home equity loan, you can receive 25% more than your equity.

The 125 home equity loan is basically a second mortgage. The borrower will still pay their regular mortgage and then have a second payment to make each month for the 125 loan. For example, if your house has an appraisal value of $100,000 and your first mortgage is for $90,000, you will be able to get a 125 loan amount of $35,000.

This type of loan can be very advantageous to homeowners who need a large sum of money, but do not have sufficient equity built up in their home to cover their cash needs. Homeowners may want to do some major home improvements, pay for their children’s college education, have unexpected medical or other emergencies come up, want to start a business, or have other situations where cash is needed. A 125 home equity loan also comes with several potential disadvantages as well.

The most advantageous thing about a 125 home equity loan is providing homeowners with potentially large sums of cash that they need. A 125 home equity loan will have a lower interest rate than a credit card or personal loan would. Part of the interest on a 125 home equity loan will most likely be tax deductible, which is not the case with personal loans or credit cards.

125 home equity loans also have some disadvantages. One of the major disadvantages is high closing costs. The closing costs on a 125 home equity loan could wind up costing a homeowner several thousand dollars and other fees may be added also.

High interest rates are another drawback to 125 home equity loans. The interest rate on this type of loan is higher than for a regular home equity loan or first mortgage. However, the interest rate will most likely be lower than the rate for a personal loan or a credit card.

One other drawback to a 125 home equity loan is that it can put the borrower at risk and make it difficult for them to sell their house. If home values depreciate it will be difficult to sell the house and move because the homeowner will still be responsible for paying the difference to the lender. Since the borrower already received more money than the house was worth in the first place, having the house depreciate in value will make it even harder to pay the loan back.

There are some nice advantages to 125 home equity loans but there are several potential disadvantages as well. So before you make your final decision regarding this type of loan, be sure to weigh all of these factors. It might be a good idea for you to review this will your financial adviser or accountant as well.

125% Home Equity Loans Could Be the Answer

admin — Fri, 10 Oct 2008 17:49:29 +0000

With the current mortgage and housing crisis there are many people who’ve seen all the equity in their homes disappear. If you’re in this boat, but are looking for a way to get a loan to make improvements you may still have an option once the smoke clears. Once credit eases up again a 125% home equity loan could be the answer to your home improvement loan problem.

125% home equity loans are second mortgages on your home and as you can probably tell they are meant to access up 125% of a homes’ value. So, even if you have little to no equity in your home you can get a loan to do home improvement projects. With a home valued at $200,000 even if you have no equity at all you could get a $50,000 loan.

If you’re considering this type of loan you should know that the main criteria for getting approved, now even more than ever, is a high credit score. Because it is an unsecured loan lenders are only interested in borrowers who are very well qualified with very little risk of default.

You can easily find specialized lenders online who deal primarily in 125 home equity loans and other types of unsecured loans. Each one has their own rules to determine qualification. While your credit score is important to all of them, some will also look at your income, your current debt levels and how long you’ve owned your home.

In most cases a home appraisal won’t be necessary when applying for a 125% home equity loan. Typically the lenders will use the current appraisal or if you’ve only been in the home a short time they will use the sale price of the home to determine how large a loan they can offer you. It’s possible they will also look at what other similar homes in your neighborhood have sold for recently.

While you may have to wait for the current credit crisis to settle down a bit, don’t give up on getting the money you need for home improvement. A 125% home equity loan could be just what you need if you’re looking to tap the value of your home. Take the next few months to improve your credit score and you’ll be in a much stronger position to get approved once you do go for that loan.

Get a 125 Home Equity Loan Easily

admin — Fri, 05 Sep 2008 22:32:19 +0000

What is a 125 home equity loan? I’m sure most of you have heard of the traditional home equity loan which allows a homeowner to get loans for a wide variety of uses. These loans let you access the equity in your home without selling it. What some don’t know is that there are many home equity loan options and the 125 home equity loan is one that some homeowners can take advantage of to access even more cash without selling their homes.

First off, let’s define what equity is. Equity is determined based on two important factors, the amount owed to the mortgage company and the value of the home. Quite simply, the amount still owed to the mortgage company is subtracted from the value of the home to determine the equity value of the home. For example, if your home is valued at $300,000 and you still owe $150,000 to the mortgage company then you have $150,000 in equity. This value can rise or fall with the real estate market, meaning in a rising market you will acquire additional equity in your home as the homes value rises.

Traditional Home Equity Loans vs. 125 Home Equity Loans

When securing a traditional home equity loan the lender will offer a loan not to exceed the equity value of the home. So, if you have $50,000 in equity you’re eligible for a $50,000 loan. You can use this cash for pretty much anything from debt consolidation to home improvement to starting a business or even paying for your child’s college education.

A 125 home equity loan will allow you to borrow more than the equity value of the home. In fact, it lets you borrow up to 125 percent of the homes value. Many refinancing lenders have stayed cleared of this type of loan sine part of it is unsecured, however an increasing number of online lenders are offering 125 home equity loans. If you have a high credit rating you’re even more likely to get approved for a 125 home equity loan.

125 Home Equity Loan Warning

If you need a large amount of money the 125 home equity loan could be for you. Those starting a business or using the cash for large home improvement projects can benefit from this type of unsecured home equity loan.

As long as the value of your home continues to rise you’re in little danger from the 125 home loan, however if home values decline you could end up owing more than your home is worth. Keep this in mind when considering a 125 home equity loan.

Depending on your circumstances the 125 home equity loan could make very good sense or it could be a recipe for disaster. If you’re using it to finance a business start-up make sure you have sufficient cash flow to continue paying on the loan. Those using the 125 home equity loan for major remodeling may be in the best situation since the remodeling will likely increase the value of the home, possibly enough to offset the unsecured portion of the loan.