Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
A 125 percent LTV home equity loan is a second mortgage that is at a rate that exceeds the home’s value. The loan subordinates to the primary mortgage but credit becomes a chief consideration since the loan is more than the available equity. The interest rate on this type of loan tends to be higher than for traditional mortgages. For the most part, the loan rates tend to be five to six percentage points above traditional mortgages. The higher rates are accepted within the lending industry because it is considered a second mortgage and is riskier than other mortgages. In essence, the lender is allowing a borrower to take a loan amount that is higher than what their property value is.
The typical fees that are associated with this loan program are a loan origination fee, application fee, processing fee, underwriting fee and closing fee. Additionally, there will be third party fees, or escrow, title, appraisal and recording fees assessed with the loan. Even though the resulting loan gives the borrower an excess amount that is over the amount of the home’s equity, the loan is closed like any other loan. Some lenders have streamlined the process, but for the most part, the process remains unchanged.
- Second Mortgages: Advantages and Disadvantages
- Should You Refinance? Make Sure the Timing is Right
- Short Selling a Rental Property
- What Lenders Don't Reveal About Home Equity Loans
- Low Down Payment Loan Qualification
- 3 Common Short Sale Mistakes
- What To Do When Mortgages Default
- 3 Factors that Can Negatively Affect Your Mortgage Application
- How to Get Approved for an FHA Loan despite Bad Credit