How do you know if a 125 second mortgage is right for your families needs? It starts with a little research. 125 Second mortgages allow you to borrow up to 125% of the value of your home, essentially more than it’s worth. You do need a good credit rating but a lot of equity is not neccessary.
The biggest lure for borrowers is the 125 second mortgage carries a lower monthly payment. They usually run 15 to 30 years in length. Borrowers are only repaying a small portion of the principal each month. It’s not unusual for someone who has credit card balances to reduce their monthly payment by one third if they transfer to a second mortgage.
Another big lure is the fact that some or all of the interest expense can be written off on taxes.
Be sure to compare closing costs too. They are as important as rates because they can be a hidden expense. Take a look at the APR. It calculates both closing costs and interest, you can find who has the cheapest loan overall. The loan aggreement terms will also affect your rates. The shorter the loan, the lower the rate.
One of our biggest questions surrounding the 125 second mortgage loan is:
What are the risks involved in a 125 second mortgage loan?
Because 125% home equity loans are geared toward homeowners who need a large sum of money, these loans are common among those attempting to start a business or are beneficial for homeowners embarking on major home improvement projects.
When home prices are on the rise, 125% home equity loans pose little threat. Alternately however, if the housing market takes a sudden dip, those who accept 125% home equity loans will likely owe more than their homes are worth.
Underhanded lenders can offer 125% equity loans because it’s a win-win situation for the lender. If a homeowner defaults on the mortgage, the lender forecloses on the property. However, because the amount owed exceeded the home’s value, homeowners are obligated to pay mortgage lenders the difference. The best scenario is to contact a mortgage pro and use use our mortgage calculator in the mean time.
Recent news reports show that after a full three weeks of decline, the average rate 30 year fixed rate mortgage went up from 6.32% to 6.35% during the course of this week. The 15-year fixed-rate mortgage rose, from 5.97% to 6.00%. One year ago, the average rate for a 30-year fixed rate mortgage stood at 6.04% for the week. The time may be now to get that home loan.