125%
Equity Loan
(and
Phlegm)
A 125% equity loan
or 125% home equity line of credit enables one to borrow up to
125% of the value of one's home or equity in one's home. Popular
now, 125% equity loans allow people to borrow to pay for college,
home improvements, pay off credit card debts and even purchase
new properties. The downside of the 125% equity loan is that it
is so appealing that some people end up borrowing over their heads.
Many lenders are willing
to lend borrowers up to 125% of the home's value, minus the first
mortgage's balance. This can be used for loan consolidation or
for other priorities such as buying a new car. The 125% LTV or
Loan-To-Value really took off in 1997 as has never looked back
since. Loan-To-Value simply means the ratio between the fair market
value of a home and the percentage of that value that is still
owed to the lenders.
The 125% equity loan
is an off-shoot of the second mortgage loans offered in the early
1990's, which were primarily used for home improvements. These home
improvements would generally increase the value in a home so there
was a tangible pay-off for these loans. The 125% equity loan now
days is most often used for debt consolidation rather than home
improvements, though it really can be used for whatever the borrower
wishes.
The average 125% equity
loan is from $10,000 to $50,000, which can be used to consolidate
credit card debt, pay off student loans and often-times have some
cash left over for home improvement or personal use. The 125% equity
loan has been heavily marketed over the past several years, on radio
and television by smaller firms willing to take the risk as lenders.
Traditional mortgage companies are now coming on board since the
profit margin is quite in the lender's favor.
Credit card debt is
at an all-time high now and borrowers are taking advantage
of the 125% equity loans to help with this relief. The popular
125% equity loans are not for everyone, however, as consumers
wishing to qualify for a 125% LTV loan will need a FICO
credit score of 650-700 or above. In order to receive these
loans, borrowers will also need good jobs, stead incomes
and good payment histories to receive the required scores.
The ideal candidate for this kind of loan is a borrower
with considerable debt but who has always been able to pay
the bills and simply needs some relief.
Fiction: Some
of the necessary uses for a 125-percent home loan include
a trip to the Riviera, buying into a get rich quick scheme,
anything to do with Bernie Madoff, anything to do with Brnie
Mac or starting your own Phlegm Hurling Championship.
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