Thinking of Getting a 125 Home Equity Loan? tagged: , , , ,

Thinking of Getting a 125 Home Equity Loan?

Posted by in Personal Finances


Home equity loans come in a variety of forms and sizes. You can get a very small loan or even a very large one. The largest loan you can get is a 125 home equity mortgage. As the name implies, the percentage you borrow is 125% of the fair market value of your house. As you can imagine, this can be quite a risky loan to obtain.

Not only does the risk fall on you, but also on the bank. When the bank sees giving such a high loan is risky, generally they compensate with high interest rates. When you borrow such a large amount of money with a high interest rate, you risk being unable to pay the monthly loan payment. Since the equity you are using is your home, missing or being late on any payment can jeopardize your ownership of that house.

When you get 125% equity loan, you can use the money for whatever you desire. However, it is suggested to spend the money on repairs or upgrades that will increase the market value of your house. As a result, you can eventually make the money back if you happen to sell your home. Some people use the money to pay off credit cards that have an even higher interest rate or simply purchase new large appliances for the home.

As with any loan, obtaining one is not a financial planning decision to make lightly. In addition, you should never borrow more than what you can afford to pay back. Remember, that if you cannot afford the monthly payment you risk losing your home. However, if your home is in need of repairs or updates, obtaining the loan can pay off in the end. If you need money for other reasons, you should consider other options first before using the equity of your home.