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

Tip! Always get hold of all the information of the home equity loan fees and charge before you sign the contract. Some home equity lenders feature packages.

Home equity loans are beneficial for numerous reasons. If you own a home, and need extra cash, obtaining a home equity loan will put 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 reluctant to approve homeowner for loans that exceed the equity value. However, you may find 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 grant 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 recent years, the amount of people applying for these loans has dwindled. Those who apply for these sorts of loans generally require a large sum of money, and do not have 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 your home's value may appear to be a solution to extreme money woes, no equity home loans are very dangerous. Today, the housing market is strong. Most cities throughout the country show a 22% increase in home values annually.

However, if the housing market was to slow down, and home values began to fall, those who obtain a 125% home equity loan would likely be unable 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 addition $50,000.

Tip! There are two types oh home equity loans, the home equity and the home equity line of credit. Conversely, home equity line of credit allows you to borrow money as you need it and pay the interest on the outstanding amount.

Furthermore, some homeowners are unable to afford the extra monthly payment of a high second mortgage. If you default on a home equity loan for three consecutive months, the lender may foreclose. While these loans are ideal for paying off bills and debt consolidation, some homeowners fail to close paid off accounts, which results in acquiring more credit card debt after the accounts are paid.

Here are our recommended Home Equity Loan Companies online.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.

Home Equity News:

Bing: home equity site:msnbc.msn.com
Search results

Home equity loans drying up for some - Business - Personal finance ...
Like many homeowners during the housing boom, Lynnette Madden and her husband decided to open a home equity line of credit about a year and a half ago as ...
Americans' home equity near a record low - Business - Real estate ...
WASHINGTON ? Falling U.S. home prices have shrunk equity so much that the proportion of their homes that Americans actually own is near its lowest point ...
Home equity lines have dried up across U.S. - Business - Personal ...
Home equity lines have dried up across U.S. As home prices collapse, banks cut off credit, further souring the economy Below:
Late payments for home equity loans rise - Business - Real estate ...
WASHINGTON ? Late payments on home equity loans climbed to a 1½-year high in the opening quarter of this year, while delinquencies on credit card bills ...
Retirees no longer count on home equity - Business - Personal ...
Many Americans have recently found themselves changing retirement plans after losing a substantial amount of home equity as the housing market and the ...
Equity in Americans? homes falls to historic low - Business ...
NEW YORK ? The equity Americans have in their most important asset ? their homes ? has dropped to its lowest level since the end of World War II ...
Students get creative to pay off loans - Business - Personal ...
Lines of credit typically work like a credit card, with a limit and a revolving balance: the average home-equity line of credit currently has an interest rate ...
Use of home equity hits a four-year low - Business - Real estate ...
Use of home equity hits a four-year low Freddie Mac report cites falling residence values, stricter lending standards Below:
Ford, Toyota are pinning their hopes on China - Business - Autos ...
NEW YORK ? Ford Motor Co. plans to build a new assembly plant in China ... $30K home equity loan FICO: 5.75%
Cities sue, invest to stop foreclosures - Business - Real estate ...
These stem from lost tax revenue and jobs as well as slower consumer spending that come with home equity declines, and don?t even include the financial toll ...

Newsfeed display by CaRP