If you have researched 125% secured loans or are looking for such a loan for yourself, the 125 Secured Loans website will explain what type of loans there are and provide you with details on some of the pitfalls that may come with them.
The name actually describes an agreement whereby you are borrowing 125% of your home value. The first thing you will want to ask yourself is “why do I want to borrow 125% of my homes worth?” This is a risky credit product and really requires some serious thought.
Typically, 125% secured loans are not granted to new home buyers with no history. They are however, offered to individuals who have had a mortgage previously and have proven themselves creditworthy by paying the loan back on time. One example where such a loan might be used and where the lender is willing to lend 125% more than your current value, is when you are borrowing the money for home improvements and once they are completed, the “as completed” value on the property appraisal comes into play, so your loan to value ratio is actually within acceptable standards.
Just exactly how does this work? Here is a simple example. Remember, for simplicity we are using this example and the formula can be different depending on the lender and many other factors. Let’s say the market value of your home is currently $100,000 and the current balance on your mortgage loan is $100,000. You need $50,000 additional money to replace some outdated plumbing, a new roof and bathroom fixtures. The market value of your loan after the improvements are completed comes in at $275,000. See how this works? The lender is only advancing on a 125 secured loan for a short time (less than one year) and then the mortgage falls into an acceptable range with a new market value previously established.
As mentioned, there are many other variables to take into consideration with a 125% secured loan. If you are researching these types of loans, it would be advisable to sit with your lender of choice prior to going through the application process so you know what guidelines they require. That way, you will have a heads up on how this will work for you before you enter into an agreement. There are many loan options out there, so it is worth investigating them all before you take on such a commitment.
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- Secured Loans For When You Can’t Get Credit
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