Home Equity Loans Rate | Home Equity 125% Loans
A home equity 125% loan is a type of second mortgage. Using your home as collateral, it lets you borrow up to 25% more than the home’s appraised value. Sounds pretty good, right?
But, “Borrowers Beware!” the Federal Trade Commission warns.
Why? Because there are hundreds of dishonest and deceitful lenders willing to promise you anything to make a quick buck. You don’t want to be another one of their victims.
These unscrupulous lenders use the home equity 125% loan to con unsuspecting homeowners. Their most vulnerable victims are the elderly on fixed incomes and those people with low income and poor credit. The scammers are looking people with a desperate need for quick cash. Even middle class homeowners, overburdened by unsecured credit card debt, are at risk.
The 125% home equity loan is a major reason why foreclosures are increasing all across the country. In the past year, they doubled in California. As the housing market’s gone soft and homes are not worth now what they were appraised at several years ago, many people are losing money on the 125% loan.
Unscrupulous lenders and mortgage brokers, along with high pressure home improvement salespeople, debt consolidation advisors, foreclosure “rescue” companies, manipulate and deceive victims into thinking the 125% home equity loans are in their best interest. However, they downplay the fact that many times this type of mortgage loan comes with 30% interest rates and hidden fees of 20 points or more.
These lenders have nothing to lose. They make a bundle of money if you pay back your loan or not. They win either way. They make a profit on high loan fees and points, selling the loan to a private investor or getting paid in full if the borrower refinances with someone else. Better yet, if you default on your loan, they get your home and all the equity in foreclosure. In fact, many of them would prefer to just get their hands on your equity rather than collect interest.
The 125% home equity loan only works if you have stable income sufficient enough to cover your monthly installments. This type of loan is not for the desperate or the vulnerable, no matter how attractive unscrupulous lenders make it appear.
To be safe, work only with an established local lender you know you can trust. Don’t allow yourself to be conned by some stranger into taking a second mortgage that may force you into a foreclosure – i.e. if you want to keep the roof over your head.