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Credit is the key to 125% home equity loans

Homeowners with little, or no home equity, have the option of the 125% home equity mortgage loan, which can provide a loan up to 125% of the current value of your home. Even if you just recently bought your home, 125% home equity loans can provide money for home improvement, debt consolidation, or personal cash out. The key to getting a loan is a higher credit score.

Lenders usually use an automated appraisal for loans up to $100,000. For higher loan amounts, there may be an appraisal required depending on the loan underwriting guidelines. If you have owned your home for less than six months, the purchase price may be used as the value.

125% home equity loans 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.

By: www.crhome.com

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