125 Equity Home Loan - When It's Right

2008-11-05 12:25:34

( Financial )



If you are a homeowner in need of a home equity loan but you have not yet built up any equity in your home, do not be disheartened. A 125 equity home loan may be the answer. The term equity is generally used when referring to the equity available from an asset; in simple terms equity is the amount of money you have tied up in an asset. A 125 equity home loan is a second mortgage loan that allows you to borrow up to 25% more than the value of your home. For example, if your home is worth $100,000 and you owe $100,000 on the mortgage, this loan program would allow you to still borrow up to $25,000.

The 125 equity home loan is a partially secured loan, which means that the portion of loan that exceeds the value of the loan is insecure. Because this makes it a risky investment for the lenders, equity loan interest rates are slightly higher than the traditional equity loan.

The 125 equity home loan is offered by various lenders found on the Internet. Of course, each lender has its own qualification and loan term guidelines, but generally this is a credit score driven loan program wherein you have to have a certain credit score to qualify for the loan. In addition, your credit score usually determines the maximum loan amount you may qualify for and the maximum cash in hand you may receive. Most 125 home equity loan lenders do not require you to obtain a property appraisal. They generally will use the purchase price of your home as the value if you have lived in your residence for 12 months or less. If you have lived in your home over 12 months, a recent tax assessment, simple drive-by appraisal, or automated value model (AVM) can be used. An AVM is a computer-generated assessment of the value of your home, which is based on recent home sales of comparable houses in your neighborhood.

A home equity loan with the right equity line rates can make all the difference to your home loan over time. The compounded effect of smaller rates and increasing value will give you more buying power as time goes by. However, if your home value decreases, your equity will decrease as well and you could actually end up owing more than your home is worth. How much sense a 125 equity home loan can make for you really depends on your needs and circumstances. As with any other loan, be equipped with a disciplined pay back plan to avoid the downside that comes with the 125 equity home loan.


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