Are 125% Home Equity Loans Right For You?

It can be very stressful to consider borrowing money using your home as collateral. When you borrow using the equity in your house than a default may mean that you forfeit your home. It is very important that you only borrow the amount you can afford to payback each month. There is a range of zero to one hundred percent involved in home equity lending. There can be 125 home equity loans. This means that the some loans allow financing an additional twenty five percent above the current market value of the home. People that choose to do that do so in order to pay down debts for credit fix, repairs on their homes, or more.

When you get a home equity loan, it is very risky compared to a low percentage equity loans. When borrowing higher amounts the rate of interest also increases. This often results in a large increase in your monthly payment. There is a tax disadvantage as well. If you borrow more than a hundred percent against your home, you cannot deduct that amount on your income taxes.

It may be even more of a risk when it comes time to sell your home. This is important because you have now borrowed more than the actual value of your home’s worth. You now need to sell your house for twenty-five percent more than the market value.

Because there is such a high risk involving the loss of your home, if you are unable to pay the loan back each month, this type of loan needs to only be taken out if there is absolutely no other way to survive. So be positive that you can make the monthly payment amount. If you are not able to pay a home equity loan, you will lose your property. Some people do this to make the repairs needed, in order to sell the house. This may be a necessary reason.


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