125 Home Improvement Loan
There is finally a solution for first time homeowners that are drowning in debt. 125% Home Equity Loans allow money to be borrowed against the home, even if the owner doesn’t have enough equity for a standard loan. Typically granted for home improvement projects, they are also a great way to pay down on credit cards and other high interest debt. Even in a weak market, a home increases in value when improvements are done. This is why lenders are comfortable in providing these types of loans to homeowners that have good credit scores.
The value of a home minus what is still owed is the bottom line equity. Most lenders will only allow you to borrow that amount, using the equity as the collateral for the loan. This places a lein on the property until the loan, or secondary mortgage is paid. Maintaining a good credit score will allow you to borrow 25% of the home’s worth without actually having paid down the mortgage that same amount. For example, if a homeowner has a home worth $100,000, they would be given the opportunity to borrow up to $25,000. Why do lenders offer this? They feel it’s much better to have a new homeowner reduce their overall debt, than run into payment troubles in the future.
The one thing a homeowner should not do with a 125 Home Improvement Loan is add more debt. It isn’t prudent or wise to borrow money to buy a luxury item, such as a new car or boat, and end up increasing the debt. This type of loan should be strictly used to improve property or pay down existing debt. It’s a great way to get a little breathing room in a tight economy.
