Refinance 125%

Many homeowners who have little to no equity in their property can refinance at 125% of their homes value. A 125% refinance can help you consolidate debt, improve your home or help pay college tuition. The rates for an over equity loan are much higher though and there are some risks associated with a refinance at 125% of a homes value.

If you refinance and use 125% of your home equity to consolidate debt or take cash out, make sure you are getting a fully amortized fixed rate. If you do not get a fully amortized fixed rate, there is a great chance that when your ARM adjusts or your balloon comes due, you will not be able to refinance or afford your payment.

A 125% refinance mortgage can make a big difference in your monthly obligations and the payment now qualifies for a tax deduction.

Refinancing at 125% is a good idea for those with 100% ARMS - who still have good credit. The thing is, which lenders offer it and will they be around in the coming months?

125% refinance mortgages are becoming increasingly more difficult to find a lender who is willing to accept this type of risk. For the few lenders who will still do 125% refinances, the guidelines for qualifying for these loan types are very strict and demanding. A high credit score, excellent credit history, and low debt to income ratio are mandatory.

Having a 125% loan refinance can be very risky. It creates an extremely leveraged loan with no home equity that can be dangerous in a decreasing home price market.

» DISCLAIMER: The information contained in this article on 'Refinance 125%' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.