Many lenders limit the amount of money that you can draw from your home to 80 percent of the home’s value, or at most 100 percent of the home’s value. Some lenders, however, offer 125 percent home equity loans.
What are 125 Percent Home Equity Loans?
To understand how a 125 percent home equity loan works, you must first understand the LTV ratio. LTV stands for loan to value and represents the number that comes from dividing your loan amount by the appraised value. For example, if you have an $80,000 mortgage on a $100,000 home, your LTV is 80 percent.
If you were to get a 125 percent home equity loan on this home, you would be allowed to borrow $45,000 on top of the $80,000 you already owe. Basically, your lender would be giving you more than your home is worth. The problem with this is that if you ever need to sell or move for any reason, there will be not be a way to recoup enough to pay off your debts.
Who Should Get 125 Percent Home Equity Loans
A 125 percent New Jersey home equity loan isn’t right for everyone. Homeowners can get themselves into dangerous territory when borrowing that much money. Rates on New Jersey home equity loans average 7.64 percent. If you get a 125 percent New Jersey home equity loan, you can expect to pay interest rates that are anywhere between 12 and 18 percent. This means high payments, which aren’t easily affordable. Before getting a 125 percent home equity loan, you should be very confident in your ability to pay back the money you borrow. You also better be sure that you really need the cash.
Mortgage refers a way to secure a loan using real estate property as security. It is the most popular way of purchasing real estate. Mortgage payments are of two kinds- Fixed Rates Mortgage (FRM) and ARM (Adjustment Rate Mortgage).
In FRM, monthly interest repayments are fixed for the lifetime of the loan. In ARM, interest is fixed for a particular period of time after which it will be adjusted to some market index like Prime Rate or LIBOR.
New Jersey mortgages rates change with interest rates; also several rates like Prime rate and Treasury rate affect mortgage rates. Mortgage rates are one among many factors that affect your loan. To obtain a competitive mortgage in New Jersey several factors affect the rate and points you receive.
The factors affecting rates and points are:
1) Credit Score-It is a statistical method to calculate your credit worthiness. (Debt outstanding, credit card usage, bankruptcies etc.)
2) Income- this gives an idea of how much the debtor earns through his tax returns.
3) Current Equity- Value of your current assets.
4) Current Debt- Value of the amount you owe to others
5) Loan amount- the amount you want to borrow.
There are certain limits specified by the FHA (Federal Housing Administration) on amount of Home Mortgage in New Jersey. It ranges from the least amount of $172,632 in County of Cumberland and amounts to a maximum of $312,895 in most counties like Bergen, Essex, Hudson, Middlesex, and Morris, Sussex etc.
The typical mortgage rates charged by agencies in New Jersey can be seen by the New Jersey Mortgage Rates of the COFED bank, which is a direct lender of mortgage loans in New Jersey.
To secure the best deal it is wise to consult a local New Jersey Financial Broker who is familiar with the nitty-gritty’s of mortgage financing in New Jersey.
Getting a New Jersey home mortgage loan can be an exciting process. New Jersey is a wonderful place to live and homes are typically a good investment. However, you shouldn’t get so caught up in the excitement that you miss important information about the loan process. To help you out, here are three things you should know about mortgage loans:
Your Options Are Endless
The days of having only one mortgage loan program to choose from are long gone. Borrowers today have a whole slew of creative financing options available to them. There are balloon loans, interest only loans, 40-year loans, 80/20 loans, and dozens upon dozens of other loan programs to choose from. Before you jump on the first approval that comes your way, you should take time to investigate all of your options.
You Will Probably Have to Pay Points
Paying points on a New Jersey home mortgage loan is very common. Points are a way for lenders to make money on the loan. Borrowers may also pay points in exchange for a lower interest rate. One point is equal to one percent of your mortgage loan. The good news about points is that they are usually tax deductible.
Your Credit Affects Everything
Most people know that a low credit score will have an effect on the interest rates that they pay on a loan, but what they don’t realize is that their credit score will also affect closing costs and PMI (Private Mortgage Insurance) premiums. Anyone with a credit score below 620 is usually considered a subprime borrower and can expect to pay higher costs on every aspect of their New Jersey home mortgage loan.
Mortgages are a trillion dollar business in the US. Mortgages started in 1934, when the Federal Housing Administration (FHA) lowered down payment requirement on loans and allowed 80 loans-to-value loans. The FHA also increased loan terms to 15 years compared to 3, 5, 7 year loans that ended in balloon payments. This led to a flurry of activity and spurt in mortgages.
Compared to 1940, when only 40 percent of households owned homes, the mortgage business boom has resulted in 70 percent ownership in 2000. In 2003, total U.S. residential mortgage production reached a record level of $3.8 trillion through record low interest rates.
New Jersey Mortgage companies offer finance for new home purchases, debt consolidation loans, refinancing loans, home equity loans and commercial property mortgages.
In each case, the debtor needs to prove creditworthiness. There are two basic types of amortized loans. ARM or Adjustable Rate Mortgage has a fixed interest fate for a certain period that is eventually adjusted according to market rates. FRM or Fixed Rate Mortgage has a fixed interest in monthly payments until the end of loan period. A third kind called a Balloon loan calculates interest for a certain period but the outstanding principal is made payable at some date within this period.
To start the mortgage process, a borrower submits a credit report to an under writer. A mortgage broker may select the best company suited to the borrower’s needs. Next a lender is chosen. The lender charges various fees including entry, exit, administration and lender mortgage insurance fees.
Mortgage lending is big business in the US. In New Jersey there are numerous companies offering mortgage services including
Go Apply.com, Lending Tree, 4Low rates, Abacus Mortgage, All Options, America’s Lending partners, Ameriquest Mortgage, Champion Mortgage, Circle lending, Countrywide loans, E-loan, Fast Find, Featured Bank, Greenpoint Mortgage, GuidetoLenders, Home123, Household Finance Corporation, ING Direct, Loan Web, Loan Atlas, Loanapp, Low cost Lending, Low rate Source, Money Nest, Money Search, Mortgage Health Planning.com, National mortgage Network, Princeton Mortgage, Reliable resources inc., Respond.com, Savings path, Service Magic lending, The Loan page, Windsor Financial Mortgage corporation, Shearson Mortgage,1st Metropolitan Mortgage and American Real Mortgage Corporation.
Mortgage companies have different rules and operating rates. The borrowers will do well to consult an experienced financial advisor to find the best deal.