Second Mortgages to 125%: No Equity Refinancing
125% second mortgages are home equity loans that ironically require no equity in your home. Home equity lenders actually allow borrowers to exceed the appraised value in their home all the way to 125%.
These secondary loans are popular for financing home construction, purchasing furniture and refinancing high interest loans. According to Sandy Sarconi, an IHE executive, "Fixed rate second mortgages are clearly the direction for homeowners seeking financing without refinancing their current first loan."
The 125% second mortgage loan is secured by the collateral of your home and a good credit score essential for loan qualification. These 125% loans subordinate to the existing 1st mortgage, just how any other home equity loan works. If you get a 2nd mortgage and you exceed 100% of your home's value, then you have acquired a 125% loan. Any mortgage loan that has a combined loan to value (C.L.T.V.) between 100 and 125% is considered as a 125% second mortgage.
The mortgage interest rates are quite a bit higher than prime home equity loans under 80%(C.L.T.V.). The mortgage lender takes a more significant risk with 125% loans, because they have very little recourse if the borrower doesn't make their payments, because there is no equity to recover. Many borrowers are shocked with the home equity rates for 125 loans, but people need to try and be less rate-sensitive and more saving-focused.
In most cases homeowners take out 125% loans to pay off revolving credit card debt and they money with 125% debt consolidation. The most important issue for these no equity loans is how much money you save by eliminating your existing adjustable rate debt. Brendon Daly, an experienced loan officer from Orange County said, "the 125% mortgages are a genuine blessing for borrowers who have fallen deep into credit card debt." Daly continued, "With these loans you don't have to have equity in your home and on average my 125% clients are saving 0 a month after consolidating their debt."
About the Author: Miss Nelms publishes many popular refinancing articles online. Presently, Lynda originates loans for BD Nationwide Mortgage, located in San Diego, California. Lynda recommends the following helpful sites: Second Mortgage and Equity Loans. If you need more home equity loan advice, please visit the Fixed Second Mortgages and 125% Second Mortgage Loans online.