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Borrowing
with Little or No Home
Equity
Certain lenders are
offering 125% home equity
loans to homeowners with
little or no home equity.
This type of loan program
allows you borrow up to 125%
of the current value of your
home. Even if you just
recently bought your home,
the 125% home equity loan
program can provide for home
improvements, debt
consolidation, or cash out.
Lenders usually do not
require an appraisal for
loans up to $35,000. For
higher loan amounts, there
may be some type of
appraisal required depending
on the underwriting
guidelines. If you have
owned your home for less
than one year, the purchase
price may be used as the
current value.
A 125% home equity loan
can provide the money you
may need, but you need to
understand the risk
involved. Borrowing more
than the value of your home
means that you would not be
able to sell your home
unless the home equity loan
is paid off in addition to
your first mortgage.
Lenders also factor in
the higher risk, since there
is no equity available in
case of a possible default
in payments, so you can
expect the interest rates to
be higher than a
conventional home equity
loan. The interest rates and
the maximum loan amounts are
typically based on your
credit scores. |
