Real Estate
Understanding 125 Home Equity Loan
October 15, 2009 by Tab Pierce · Leave a Comment
With a 125 home equity loan you not only can get money for the equity built up in your house but an extra 25% as well. A regular home equity loan will only provide you with an amount that is equal to the actual house equity. A 125% loan will give you more cash if your equity is not sufficient to cover your needs.
125 home equity loans are second mortgages. Borrowers have regular mortgages to pay every month in addition to the 125 loan. The amount that can be borrowed will be 125% of the appraised value of the home minus the amount that is being paid on the first mortgage.
This form of loan can really help homeowners who are in need of a cash lump sum, but don’t have enough equity from their house to meet their financial needs. Homeowners might need to have money to send their children to college, do some major home improvement project, or have medical bills or other types of emergencies that they need to have cash for. There are some drawbacks when it comes to 125 home equity loans also.
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.
There are also some potential drawbacks to 125 home equity loans. High closing costs is one of them. 125 home equity closing costs could run several thousand dollars.
Another disadvantage to a 125 home equity loan is the high interest charge. The interest charge will be more than on a conventional mortgage or home equity loan. However, the interest will be less on this type of loan than the interest on a credit card or personal loan.
One potentially big risk to a 125 home equity loan is that the leverage on the loan could make it hard for homeowners to sell their houses. If the value on the home depreciates it will make it even harder for the homeowner to sell due to the fact that they will have to pay the lender back on the 125 loan. Because the borrower already got more money than the house was worth to begin with, a lower value on the house will make it more difficult for the homeowner to pay the lender 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.
Tab writes on various subjects of interest to him, with the main objective of educating people on 125 personal home equity loans as well as personal equity loans in general.
categories: 125 home equity loan,home equity loan,home loan,mortgage loan,loans,mortgage,financial
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