125% Home Equity Loans - Are These Loans Beneficial or Risky?

Home equity loans are good for numerous reasons. If you have a
home, and need extra cash, obtaining a home equity loan will set cash in
your pocket. The money received can be used for any purpose. Because
home equity loans are dispersed as a lump sum, homeowners usually apply
for these loans to pay for a huge expense.

No-Equity Home Equity Loan Basics

For the most part, the amount received for a home equity loan is
according to your home’s equity. Lenders are loath to O.K. homeowner
for loans that transcend the equity value. However, you may happen a lender
willing to offer a no-equity home loan. Also referred to as 125% home
equity loans, these loans are both secured and unsecured. Lenders that
offer these loans will allow you a home equity loan up to 25% More than
your home’s value.

Why Get a No-Equity Home Loan?

125% home equity loans were extremely popular in the 1990’s. In more than
recent years, the amount of people applying for these loans have dwindled. Those who apply for these kinds of loans generally necessitate a large sum of money
of money, and make not have got sufficient equity in their homes. However,
because of rising home values, few people are taking advantage of
no-equity home equity loans.

Dangers of No-Equity Home Equity Loans

While obtaining more than than your home’s value may look to be a solution
to utmost money woes, no equity home loans are very dangerous. Today,
the lodging market is strong. Most cities throughout the country show a
22% addition in home values annually.

However, if the lodging market was to slow down, and home values began
to fall, those who obtain a 125% home equity loan would likely be
not able to sell their homes. For example, if your first and 125% second
mortgage amounts to $200,000, and you can only sell your home for $150,000,
you are responsible for paying the lender the improver $50,000.

Furthermore, some homeowners are not able to afford the extra monthly
payment of a high second mortgage. If you default on a home equity loan
for three sequent months, the lender may foreclose. While these loans
are ideal for paying off measures and debt consolidation, some homeowners
neglect to fold paid off accounts, which consequences in acquiring more than credit
card debt after the accounts are paid.