125% Mortgage
Debt is a common situation among many households nowadays. The most common culprit would have to be the credit card bill. With credit card bills every month plus the other costs of maintaining a home, it is no surprise that you find yourself unable to make ends meet at the end of the month.
If you are in a lot of debt and you own your own home, a good option for you to look into is a 125% mortgage. A 125% mortgage is a great way to raise the money you need in order to meet your debts head on and, possibly get free of your debts entirely. While there are several options open to you in order to take care of your monthly debt problems, a 125% mortgage is certainly an option that allows you the biggest available funds which could easily free you of your debts.
What is a 125% Mortgage?
A 125% mortgage loan is basically a loan that you take against the equity of your home plus an additional loan based on max 30% on the said equity. The 95% portion of the mortgage loan is secured by your home. The 30% is an additional, unsecured loan. Thus, if you have a home with a valued equity of around ten thousand pounds, if you apply for a 125% mortgage loan, you can get twelve thousand five hundred pounds. This is a great option for those who have very large debts to meet or for those with homes with little equity where the 30% additional loan can be a great help.
Disadvantages of a 125% Mortgage?
Because of the nature of the 125% mortgage loan, lenders are often more stringent in checking your credit history when you apply for it. Thus, it is necessary that you have a good credit standing if you plan on getting a 125% mortgage loan.
Another thing that you need to keep in mind with a 125% mortgage is that it often suffers from a high interest rate when compared to other types of loans. Unsecured loans are often attached with high interest rates and, since the additional 30% of the loan in a 125% mortgage is unsecured, this translates to a higher interest rate for you than if you took out a traditional mortgage loan.
A 125% mortgage will also tie you down to your home. You may not sell off your home until you have paid off your mortgage loan. At the very least, you must meet the 30% additional, unsecured loan of your 125% mortgage loan before you can sell off your house. Hopefully, the remaining equity of your home when you sell it can meet your loan dues and have extra enough for you as well.
If you are still paying for your home's original mortgage, you will have to bear with a higher monthly payment fee if you get a 125% mortgage loan. This is because you will be paying for the dues of your original loan and your 125% mortgage loan.
Needless to say, a 125% mortgage loan is a risky business if you are not sure that you can meet your monthly payments. Keep in mind that you are using your home as a collateral. Thus, in the event that you are unable to meet your payment responsibilities, you may lose your home to your 125% mortgage lender.
