125% Home Equity Loan – a Great Option for Little Equity

Are you someone who is in a situation where you have only recently purchased your home and just haven’t built up any equity in it yet? Are you wanting to get your hands on some cash in order to make some home improvements, but don’t know where to turn to get it? Well, you are not alone. The solution to this problem may be in getting a 125% home equity loan.
As a second mortgage, a 125% home equity loan is designed to give the borrower up to 25% more of what their home’s value actually is. As an example, let’s say your home is currently valued at $150,000. Your mortgage still has a balance of $150,000. You could get a loan for $37,500 with this type of lending program.

The key in being approved for this type of home equity loan will of course be your credit score. Due to the structure of this type of loan, financial lenders are looking for well qualified borrowers, so if your credit is less than perfect, then this type of loan would not be a good fit for you to try and obtain.

Finding lenders is not difficult. You can easily do a search on the internet and find a wide variety of lenders who specialize in these loans. Each one will have their own sets of criteria and rules, but the differences are usually minimal. Some may require that you’ve owned your home at least 6 months, while others will use your credit score to determine the maximum amount they will loan you. The key will be in the fees. Be sure to read everything and understand what the fees will be before signing any paperwork.

A 125% home equity loan should not require any type of an appraisal on your property. Since you have only lived in your home a short amount of time they will base the loan amount on the sale price of your home.

Now, if you have lived in your home more than 12 months, lenders may use what is called a drive-by appraisal, a current tax assessment on the property, or an AVM. This is simply an estimation of what your home is worth based on what other home in your neighborhood have recently sold for.

So, if you do not have a great deal of equity built up in your home, don’t think you should just give up. Take a serious look into a 125% home equity loan and you may just find exactly what you were looking for.

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