---Most home equity loans that I am familiar with will lend an amount
such
that the total debt from all mortgages is 70-80% of the value of the
house;
i.e., even AFTER the home equity loan, you still will have 20-30%
equity
in the house.


Is this true even for the 125% equity loans? Because if you are able to
get one of these, no way you still have equity in the house.

In article .com,
wrote:

---Most home equity loans that I am familiar with will lend an amount
such
that the total debt from all mortgages is 70-80% of the value of the
house;
i.e., even AFTER the home equity loan, you still will have 20-30%
equity
in the house.


Is this true even for the 125% equity loans? Because if you are able to
get one of these, no way you still have equity in the house.

Most new mortgages these days are being written for between
95% and 100% of the value of the home. The only equity a
homeowner has after a few years is the growth of the value
of the home, which is a lot in some places. Most home equity
loans are going after the last 20% of equity that people have,
equity that exists mostly due to home prices going up. A 125%
loan takes all the equity, plus adds an amount to the loan
that is not covered by equity that goes up to 25% of the value
of the home.

As an example, a person buys a $200K home with $10K down.
After 3 years, it is worth $235K. That means they have
$50K in equity (the $10K down, plus $35K in growth, and
$5K from making payments). They currently owe $185K.

An 80% loan to value H/E loan would only net $3,000 since
80% of $235K is $188K. That probably wouldn't be worth
the trouble. A 100% LTV H/E loan would net $50,000.
A 125% LTV loan would bring the total loan balance up to
$294K, netting $109K in cash to the borrower.

-john-

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John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
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