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Return To Equity Article Archive   125% Home Equity Loans - Danger Of Borrowing More Than Homes Equity By Carrie Reeder Because of home equity loans, homeowners are able to acquire extra money for a wide variety of purposes. Moreover, these loans make it possible to tap into the equity built without selling your home. There are many home equity options. Aside from getting a loan, homeowners may opt for an equity line of credit. Additionally, there is the 125% home equity loan option. What is Equity? The concept surrounding 125% or no-equity home loans is very simple. Ordinarily, homeowners would acquire equity loans that equal the amount of equity built in the home. Before going any further, it is important to understand how a homes equity is determined. Two factors contribute to a homes equity, rising home values and amount owed to the mortgage company. If a homeowners property is valued at $200,000, and they owe the mortgage company $120,000, the homes equity totals $80,000. In this scenario, the homeowner may obtain a home equity loan up to $80,000 How 125% Home Equity Loans Differ If applying for a traditional home equity loan, homeowners may obtain a dollar amount not to exceed the homes equity. This money can be used for home improvements, starting and operating a business, retirement, debt consolidation, etc. On the other hand, if a homeowner is approved for a 125% equity loan, they are able to borrow more than their homes equity. Because a portion of the loan is unsecured, many lenders steer clear of these sorts of loans. However, if your credit rating is high, several mortgage lenders are ready to offer a no-equity loan. Reasons to Beware a 125% Home Equity Loan 125% home equity loans are more fitting for homeowners who require a large sum of money. Typically, these loans are common among those attempting to start a business. Moreover, these loans are beneficial for homeowners embarking on major home improvement projects. If home prices continue to rise, 125% home equity loans will pose little threat. On the other hand, if the housing market takes a sudden nosedive, those who accept 125% home equity loans will likely owe more than their homes are worth. Shady lenders will offer 125% equity loans because its a win-win situation for them. If a homeowner defaults on the mortgage, the lender forecloses on the property. However, because the amount owed exceeded the homes value, homeowners are obligated to pay mortgage lenders the difference. About the Author: Go to www.abcloanguide.com/homeequityloan.shtml for more Home Equity Loan Information. ABC Loan Guides lenders are reputable and offer competitive rates. Investment Capital

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