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Paying off a 125% equity loan can be a bit tricky. When you borrow more than the value of your home, you sometimes feel overwhelmed when it is time to pay the money back. While it will not be easy, you can pay it off if you take the right steps. Here are a few tips to paying off your 125% equity loan.
1. Add to Your Payment
Many people underestimate the power of adding a few dollars to your monthly payment every month. They see this big equity loan balance and think a few dollars isn't going to help anything. Then they just keep making the minimum payment every month and freak out when the balance is still there at the end of the loan. By paying an extra $50 a month or more, you can make a huge dent in the home equity loan balance. Any extra payments you make will go directly towards retiring the principal of the loan. None of it will go toward interest or any other fees. Therefore, it is a fast way to pay off your balance.
2. Use Lump Sums
Another great way to pay down 125% equity loans is with lump sums. Applying your tax refund or any other lump sums will bring down the balance on the loan.
3. Let Appreciation Help
Your house will appreciate the longer you stay there. Use the appreciation to pay off the loan when you sell the house or refinance and get the cash to pay it off.
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